Forex news trading strategy
by, 08-30-2011 at 01:02 PM (1837 Views)
Throughout my trading career I have used one trading system that is very risky, but also very profitable and that is economic news trading system. Not many traders want to practice this method, but if you know how to do it, you can possibly make money every week, because there is always some economic news coming. Usually there could be about 2 or 4 important news coming from some country and using some technical set ups you can trade each one of them.
Generally speaking, if you know what support and resistance is, you know half the job. So, what you need to do is to define a resistance level on 1 hour chart and a support level on 1 hour chart. The idea is: when news come out it gives such a stimulus to currency pairs that they sometimes jump more than one hundred pips per second. So, either your resistance or support level is broken. Now, before news come you place an order below support and one more order above resistance. When the price reaches either one of those levels your order is opened and you go with the price.
When the price runs out of steam you close your order and spend the rest of the day as you wish. In fact, this type of system does not require you much time to invest. You just mark those support and resistance levels before news and place the orders. If the market does not go wild and your orders are not opened you just remove them and wait for the other news release, perhaps another day.
I particularly like news from Great Britain as pound is a very volatile pair and news creates some nice moves in pound pairs and creates much bigger opportunities than in any other pair. I also enjoy Canadian dollar pairs as these make some nice moves too. eur/cad and gbp/cad are the biggest movers in Canadian dollar pairs. You can definitely use eur/usd or Japanese yen pairs to trade these macroeconomic events as well.
Before you trade the system I would recommend practicing it on a demo account and see for yourself whether it fits your trading style and personality. And while trading never risk more than you can afford. Learn to trade while practicing and only then play with real money. Good luck.