3 important things to know before you can trade the major news events
If you have traded or watched the market during the high impact news events release like NFP or fed speeches You will relate to some of the things you are about to read here.
Don’t forget to share and leave you comment after reading this post. Enjoy…
#1. Spread increase
Just before or during the high impact news events like spread tend to increase dramatically, you will see a 1.5 pips spread turn into a 15 pips spread in a matter of seconds.
why spread increase dramatically during the major news events?
Well, Spread increase because some traders like trading the news events therefore they will place too many orders during the news therefore forex brokers and interbanks will receive too many orders within a very short period of space.
Also, some forex brokers increase their spread, they do that because they know many traders will be trading therefore they want to make more money In a short period of time through spread.
This is why it’s very important to choose your forex broker very carefully when you open your live trading account.
#2.Market noise increases during major news events
During the news release the market price tend to move up and down very fast, it can move 20-70 pips in a matter of seconds causing too much noise and making it very risky to trade during the news and this causes traders, especially inexperienced traders to lose a lot of money or even worse blow up their trading accounts.
Again this happens because some traders avoid trading during the major news events so they exit and wait till the noise has settled down
while others enjoy trading the high impact news events because it makes them a lot of money in a short period of time.
#3. Pending orders
Ever placed a pending order during high impact news release even ? Notice what happen?
Market price volatility tend to increase during and after news release. I’ve seen GBP pairs moving +1000 pips in under 1 minute around October 2016 and one of my friends was caught on the wrong side and blow up her trading account that night.
If you place a pending order during the major news release, sometimes it will not be triggered or it will be filled at a different price.
your entry point will differ from the level you set, plus you still have to pay for the spread.
This happen because Market price move way too fast and pass your entry level, so fast that your broker don’t get enough time to fill your order at the exact level. Also the volatility increase so much that it can skip your stop loss level and cause you to lose even more.
Even thought I consider myself as a 100% pure price action trader I still check the economic calendar right before I place a trade due to the bad experience I had in the past that nearly cost me to lose half of my trading account but I don’t let news dictate me when I trade because even those news that are regarded as high impact news- those that are expected to move the market, only few of those are important and the rest will not move the market reasonable enough if not at all.
Don’t worry too much about the news rather focus on charts-They are your best friends-learn to communicate with your charts, they will tell you where the price want to go and news are only there to help the price get there fast.
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