News Trading And Forex Pattern Trading

News Trading vs Forex Pattern Trading

When a trader is trying to speculate on the direction of a trade, they are projecting a move into the future. The problem is that other traders and systems are also doing the same, have done the same and will do the same. These traders may have very different time frames in view, from very short, high frequency time frames to much longer. The results in a complex set of patterns on the chart.

However what grounds the move to some extent is momentum, that is the time frame collapsing into the now, with a clear pattern formation or a momentum driven move. These moves may have a logic within them from traders, which is counter the momentum, for example all sorts of reasons why some traders may go in the opposite direction, or help nudge the market into volatility or a reverse by closing positions.

So an idea can be formed that the market is not illogical, but very logical indeed. While some traders may trade on emotion and make illogical emotion driven moves, others will be constrained by the logic of their trading system, whether implemented by robots or by themselves. The robots can be seen as potentially having a considerably tighter constraint and a more exact logic, compared with the self directed human trader, who also may let emotion change their system.

The logical trader may end up seeking some view of logic in the market. This can be the attraction of news trading, as it itself collapses many constraints, such as time and length of the time frame. But even here the market may make a move which seems illogical, which for example, can be seen in oscillation, which can happen for a wide range of news inputs. So perhaps this points to something that is not logical at all in the heart of the market.

There may be something along these lines: the Forex market itself is relative valuations, thus it is easy and prone to having an inconclusive result to anything, given the complexity of outcomes which can be seen even at the level of news trading. So to some extent an oscillation or its equivalent is a logical outcome at any time.

Trade entry can be seen potentially composed of different elements to consider from time to volatility

The reality of Forex trading may be the intense unpredictability, the tendency for retracements and reversals coming from nowhere. This is also why pattern based trading is important, as patterns are like repeated templates of market action and reaction so the trader does not worry about why but is more focused on what happens.

So is there a pattern to news trading, in fact news trading is kind of the opposite of pattern trading, as it seeks to find a logic, but one which so often does not happen. The patterns however can come from timing, that is taking a position sufficiently close to release to avoid intense volatility but sufficiently far to hit a kind of quiet zone and an exit when a move pauses, if it happens to go in the chosen direction.

To some extent this is like ordinary pattern trading, as it seeks to establish a beginning (entry), middle (management) and end (exit) for any trade, derived from a pattern. If it happens that such processes come into confluence with all the other factors creating and managing and exiting trades, in some way, then the pattern may work out.