Forex News Trading is very lucrative if not one of the most lucrative aspects of Forex trading if you have the requisite skills, tools and knowledge. I know a friend who only trades the US NFP, and makes a decent living out of it. Based from my experience just one good trade on a news event can be worth more than many trades taken through technical methods
No.1 - What Stop Loss Should I Use?
Ans: This question is quiet very difficult to answer because the impact of most news events are not static in nature and behaviour. Therefore you cannot come up with a definite stop loss value. However based on experience I most often utilize a special dynamic Support & Resistance Indicator to guide me in setting Stop Loss. See Part 2 of the series: How I Trade The News.
Stop loss varies with the severity of news events. For example events like Interest Rates, Employment Change, & Press Conferences can be very volatile with huge spread widening prior to the news release. Hence in such cases stop loss should be set far apart with the guidance of a support and resistance indicator. I personally modify my orders keeping a safe distance from price until the news is released. In addition to this you can use trailing stops.
No.2 - What's The Ideal Take Profit For News Trading?
Ans: Same thing applies here like above. You cannot
absolutely tell how far price would go after a news release. We've seen cases where the reaction of an event came out so strong that price went as fas as hundredths of pips, and in some cases very huge gaps in split seconds. An example was the Swiss Franc Capping Episode last year, which sent many brokers & financial institutions bankrupt. At the same time some events can come with mixed reactions though the deviations are met but the market reacts very dull and so take profits are not met. The principle here is set your Take Profit as far as possible while using trailing stops or trade management software to manage the profit all the way.
No.3 - Do I Stand A Better Chance Placing Orders Few Seconds Or Minutes To News Release?
Ans: No it is not always good. There are some specially designed EAs that has the capability to do so but the result would often lead to slippages, requotes, and orders not getting filled. The reason why this happens is that orders passes through a process before getting executed (filled), and the lengthier the process the more exposed to failed orders. In some cases orders goes through the broker to the liquidity provider and then back to the market or through the broker to the liquidity provider and then another liquidity provider until a price is matched then back to the broker or to the market. So before it goes through these trips, price has already moved on and then you get error messages like requotes or slippage (meaning the price you bidded is no longer available). However super auto click systems might be able to get your order in at super milliseconds but not all the time. Do not forget at certain news release, there's a very huge price feed demand all over the world and as such price feed servers can go haywire due to the surge thereby causing slippage.
No.4 - Why Do I Always Get Slippage Or Requotes? Is My Broker Playing Pranks?
Ans: Slippages occur when the price (order) you requested for is no longer available at the current market price, and then you are asked to requote (i.e. place it again with the available price). Actually some brokers might be responsible due to their type of operation (i.e. ECN, STP, or Market Maker). That is why it's advisable to trade with ECN or STP brokers. Another reason is because you placed an order few seconds or minutes to the news release. Within that period most price feed servers are overloaded and price must have moved ahead when you placed the order. However if you place your orders some minutes away from the news release like 10 minutes away and slippages always occurs then your broker needs to be checked.
No.5 - Deviation Was Met But Price Went The Wrong Way. What Happened?
Ans: This is a very strange occurrence and I've experienced it before. See this article that covers the best possible reasons why such occurs. When Deviation Goes Wrong
No.6 - My Broker Blocks My EA or My EA Does Not Function The Way It Should During News Release!
Ans: In order to be sure where the problem is coming from follow this steps:
- Contact your broker and inform them of the EA and how it operates. Please be honest with the details of the operation because certain EAs are not permissible with some brokers.
- Check the journal tab and expert tab for further information that will show you internal functions and execution of the EA, which you can use to probe the EA & the broker.
- Check the EA settings properly and carryout more checks with the developers to ensure you're using the right settings. In some cases i've noticed that traders more often tweak their EAs beyond the normal settings in order to get them produce "super" results.
- Test the EA on another broker and observe obvious behaviors if any.
No.7 - I Need A Good News Trading EA
Ans: See the following:
- Top 6 News Trading EA & Software Applications
- 3 Crucial Tools & 3 Essential Basics For Successful News Trading
No.8 - Please Recommend A Broker With No Slippage & Low Spread For News Trading!
Ans: We generally shy away from making recommendations but we know how important this is. From our personal experience we recommend HotForex Broker. They have a special account for News Trading & Scalping EAs called Zero Spread Account. See more info: HotForex Zero Spread Account
No.9 - Which Timeframe Is Preferable For News Trading!
Ans: Preferably 30mins. It's easier to view candles and manage the trade. Stay away from smaller timeframes for news trading unless your manual trading strategy relies on smaller timeframes. However for EAs this is not necessary. You can use any timeframe and chart for EAs. They do not necessarily need it to work since the logic is inbuilt.
No.10 - Which Currency Pair Would Give Me More Profit In News Trading?
Ans: The impact of news events reflects on the currency tied (paired) with the country where the event is coming from. For example an event from the US would impact on its direct pairs like JPY, GBP, or NZD. However there are certain currency pairs that have higher spread and currency exchange value. These pairs generates more profits but the spreads can be high. An example of such pairs depending on the events are
