You will see listed the upcoming news
reports for each currency pair with the date and time.
We only want to focus on reports for
the USD or GBP, not because the other don’t work but I have not
tested them as of yet.
These are the main reports I trade:
• Nonfarm Employment Change
• Trade Balance, Import Prices m/m
• Producer Price Index m/m, PPI excl.
Food and Energy m/m
• Durable Goods Orders
• Gross Domestic Product q/q (p), GDP
Deflator q/q (p)
• Nonfarm Productivity q/q
• Retail Sales m/m, Retail Sales
excl. Autos m/m
• FOMC Interest Rate Statement
You will see all these reports every
month except for the FOMC which is less often. It is important that
you make notes for the upcoming month with exact times each report
will be released. You will be preparing to set orders not long
afterwards. For the purpose of this example I am going to use the GBP
Trade Balance report which is a fairly large impact report and
released at 9.30am GMT. The most common way to trade the news is to
wait for the report to hit and open a trade in the direction the
currency pair moves. This does not work consistently and is very
dangerous. Brokers widen there spreads as a news report is about to
hit because there is very little liquidity in the market, sometimes
spreads can get as high as 25 pips! For this reason you can not trade
this way you will get bad fills and lots of annoying losses. This
system works by using the momentum after the news once the market has
regained liquidity and spreads have returned to normal. You will need
to be watching the GBP/USD with a 15 minute chart. We will wait for
the report to hit then you will see the market acting wildly as
people all over the world are trying to take orders. Usually after 10
minutes or so the market has calmed down and the currency starts its
move in the desired direction depending on the news.
15 minutes after the report has
been released the current candle will close and we are ready to make
our trades. Set two orders one sell order 2 pips below the candle
and one buy order 2 pips above the candle. Each trade should be
set with a 20 pip stop + spread and have a 20 pip trailing stop in
place. Once this is done you can sit back and relax. See the picture
below for the example of the GBP Trade Balance report.
As you can see the sell order was
triggered almost as soon as it was set and the currency shot off in
the desired direction. The 20 pip trailing stop moved the position to
break even and continued to move down in 20 pip increments. The trade
closed with 31 pips profit once the trailing stop was hit.
As soon as your position is at break
even you must remove the other order! If the first sell order we took
here had not made it to break even and had been stopped out for a
loss of 20 pips we would leave the second order in place as my
testing shows that more often than not this reversal trade will be
profitable. I wanted to show you this example of a recent trade
because it was not a huge win. I don’t want to over exaggerate the
trades. Yes I do have trades that run into the 100's of pips but not
all of them will be fantastically profitable. What is important to
understand is that OVERALL the system will produce profits monthly.
There are a couple of important rules that you must follow in order
for this system to even more profitable for you. Do not take any
trades if the currency pair has already moved 70 pips after the
report was released. This does not happen very often but when it does
its best to stay out. Always check your brokers spread before making
a trade, be sure it has returned back to normal, if it has not then
don't trade.
System Rules
Let's run through
the simple rules just to make sure you understand then I will show
you my actual results from 1 years trading.
1. Check the
upcoming news reports and plan the times you will be trading for the
USD and GBP.
2. On a USD?GBP 15
minute chart be prepared to set your orders once the first 15 minute
candle of the news has closed.
3. If the currency
pair has moved more than 70 pips before you place the orders DO NOT
TRADE!
4. If your broker
spreads have still not returned to normal for some reason after the
15 minutes DO NOT TRADE!
5. Set your orders
2 pips above/below the 15 min candle both with 20 pip trailing stops.
6. Once one of the
positions is at break even from the trailing stop remove the other
pending position.
7. If one of the
trades results in being stopped out leave the other pending order to
be filled in the opposite direction.
8. Once a trade is
open do not touch it, let the trailing stop take you out of the
market.
9. Keep records of
every report you trade with notes, this will help you greatly in the
future.
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