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I have come across a relatively safe way to trade news events. It works well when the news event comes out close to market expectations. Today's trade was as close to textbook as it comes. I plotted the range of the spike on a 5m chart. Sometimes, it takes longer for a range to develop. Right now I am seeing another short possibly setting up, but lets stick to the trade at hand. We had a 79 pip range spike in the first 5 minutes. Your charts may show something different. I saw my brokers spread go to 20 which is why I trade the aftermath of news. You get better fills then. Chart the high and low an d wait for a break of that range. I usually like to see a breach of 5-10 pips. I just jumped in today on the break but price has a tendency to re-test the range break. Today it nailed it right to the pip and then reversed. My first target is 70% of the initial range at which I take 1/2 off and then move my stop to break even plus the spread. Sometimes it will run like hell and sometimes (today) you get stopped out.
Be careful out there.
Friday, January 9, 2009
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