Talking Points:
- Trading around event risk is a natural draw for speculators, but it is fraught with risk
- The aftermath of major event risk can have many outcome, during is erratic but before is calm
- Market activity following major event risk should account for complexity, duration, volatility
See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.
Watch the recording of this week's Strategy Development session with Chief Strategist John Kicklighter. Given the market impact of the US Presidential election, it is the perfect time to discuss how to trade around high-profile event risk - specifically trading in the wake of key events. Trading around events or data that is likely to stoke volatility is attractive to traders. The potential of volatility draws expectations of big moves in a short period of time. That is more risk than promise however, and traders should be clear on their expectations, motivations and strategies entering around such volatility.
There are three general time frames for trading around event risk: before, during and after. During high volatility events, market depth and conviction in direction are up in the air. That is a time that should be universally avoided by all put the extreme risk takers or the HFT operators. While the lead up to major event risk is almost always uquiet, it is in that restraint that we recieve the kind of consistancy that is rare for markets. It is the aftermath of event risk, however, where most are drawn. The moves can be large, trends revived and conviction deepened. Yet, expectations and strategy should be established beore the update hits the wires.
Event risk can be effectively evaluated for its 'potential' to move the markets. Events like the US Presidential election, FOMC rate decision and NFPs are the big ticket items that can cause remarkable moves with potentially extreme volatility. Yet, direction and whether that exceptional activity are realized depends on the outcome. In this webinar, we discuss trading around events with an emphasis on the aftermath.
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