Broker to Trading

The moment of news release, which is a focus for news trading, has a certain simplicity about it, but a deceptive simplicity as the complexity of the Forex markets can be seen in unexpected and irregular outcomes. It does not take much strategy per se, rather it requires being on the right side of a move which continues long enough in the correctly chosen direction.

An alternative is to trade the time before release. The time before release can be a sea of micro trends which can be approached by scalping techniques. However the fact that a news release is coming up has a limiting effect on any trend formation and can inject volatility to result in reversals and irregular movement as well.

Given the volatility and the impending news release (which will tend to slow and then add intense volatility), the trader has to scalp as these trends cannot turn into a longer term trade, as it is usually understood. However one path to converting such a trade into a news trade is to trade on and against the expected direction of the news trade. Trading against the direction needs to end sufficiently before the release as the trader can be caught in a reversal as the market reacts to the news result or strong volatility close to the news release. In effect the trade is attempting to ride the market as a way of getting into it before the release (i.e. another approach to the issue of when to take a position before a news trade).

So there is a potential for a) scalping trades on micro trends and b) to find a way to get into the news trade on some kind of logical basis in a volatile and unpredictable market. There is an issue of when to take a position in a news trade as while it is the case that there can be a calm time close to release, there is also the possibility for intense volatility around this time as well, leaving the actual time of release which can be hard to get into and also can evidence significantly widening spreads.

In general news trading is risky and speculative and thus many may wish to stay away from these market conditions. However as in all trading is is probably better to try and find a well founded logic to trade rather than making purely speculative trades. This is because trading is both speculative and analytical. The reason it is analytical is that is is amenable to analysis, with the caveat that analysis still can be wrong (hence the speculative element to trading). News trading tests this premise, but it is arguably amenable to analysis as well, at least analysis based on patterns which do come into play even at the time of release, even though this tends to reflect oscillations and directionality, which are not necessarily part of normal trading, though they may underlie the more structured moves which can be seen.

As can be seen it may be possible to create a strategy based on the kind of volatility which exists in the run up to release vs the kind of volatility which can be seen at release, but in general the trader may wish to separate these regions, in the way the market tends to and employ a strategy perhaps based on scalping for micro trends and a strategy perhaps based on expected volatility for release.