Revision as of 17:48, 20 November 2023

This Wiki is part of our Fundamental and Sentiment Trading Strategies Wiki. Be sure to check that out HERE.

Trading with the News Feed

Most traders working at professional firms become day traders because this is a good combination of regular trading activity while keeping risks limited. The news feeds are the main source of all our information and trading opportunities. Without these feeds you would be effectively trading blind so we will now look at finding trades that come from the news feeds each day.

Day trading the news feeds is actually fairly simple and is one of the best ways to find high quality trading setups. Day trading is not as precise as trading and scalping key levels because the main thing behind a successful trade is not the place that you enter but rather the reasons for the move.

Let’s walk through a typical day of scanning the news feed to get an idea of the type of things we are looking for.

Your analysis starts an hour or two before the session opens as you are reading the overnight or pre-session news and you are looking for core items that traders getting to their desks are likely to react to. This does take practice to master but the golden rule of sentiment is that the more something is known the less of an impact it will have on the market.

You are looking for surprises or changes in the tone from central banks or even breaking news that could change the markets view on a specific currency or how the central bank may approach its interest rate adjustments in the future. If you see something of note then the next step is to plan your trade.

At this point, you may have found a trade and you can either jump straight into at the current market price or try to wait for the price to pullback to a nearby level of support or resistance. The risk of jumping in is that the price might pullback first and you could potentially be sitting in drawdown which means you will need a larger stop loss to accommodate for this. The risk of waiting for a pullback is that you might miss the move simply because there may not be a pullback given a clear reason to trade it from the open.

How do you decide what to do in this scenario? The best way to know how to react to the details of market information is simply practice and experience... Sorry, but that is simply what any profitable trading strategy is going to come down to; Practice and Experience. For example, the first time you see a safe haven flow you may think that the market has gone too far too fast but it then continues for several hundred more pips before thinking about pulling back. We can sit here and tell you all about how aggressive proper safe haven flows tend to be but until you have actually seen one in full force in live market action you won’t fully understand the concept.

Remember, you are now past the training stage and as soon as you start placing trades on your practice account you will be at the skill building stage which is where you will develop your experience. One of the best ways to build your skills is to practice them in the live markets as much as possible.

Trading Tip:

One tip to help your trading in the early stages is to split your position into two pieces. You can enter one at market and enter the other at your proposed area of support or resistance should the pair pullback to that level. This gives you two chances to jump into a trade but only risking one full unit of risk. If the trade takes off straight away then you get to at least make a half profit and if it pulls back you average your positions at a slightly worse price than the area of support or resistance would have offered but you still are only risking one unit of risk on the account.

This is only a starting technique to assist you in the early months because after a while you will start to see a pattern in your trading that will give you a natural confidence of when to trade and place your orders. This will give you a nice day trade that you can hold as the session plays out. Because you are tracking every trade this will also give you lots of data to look back over to see if over the long run if it would be more profitable for you to jump straight in or wait for the pullback.

Obviously, you will need to have a stop loss in place and a take profit in mind. Generally, you want your stop loss orders to be between 25-50% of the average daily range away from your entry and your target should be where the market has reacted from in the most recent sessions. It’s generally not effective to try and day trade past an established high or low because this will result in losses and not cashing in on good trades at the appropriate times. The best technique is to take your trade-off just before the top or bottom of these levels. It is never wise to think the market will make a new reaction high or low unless there is something extreme happening at that time.

What happens if you do not see a trade at the opening of the session?

You keep watching the news feed and switch to a mode where you are looking for surprises or comments that the markets are not expecting but will view as fresh reasons to trade a pair in a certain direction. These come through as headlines and there are no set standards of news or phrases we can list but the golden rules of sentiment are key here.

Generally, we are looking for an announcement from a central banker or comments from someone else closely related. For example, look for things like a dove commenting that rate hikes should be coming sooner or a hawk stating that there is a strong reason for rate cuts. These are things that can be perceived as out of line with their traditional stance.

Typically, the premium news feeds will have a list of the current hawks and doves for each central bank as part of their service. However, you can get a list by doing a Google search just as easily.

This is something that you will get better at over time so we suggest that you make this one of your staple strategies and start practicing it straight away. By keeping your eyes on the feed for these types of comments or for breaking news that could cause the markets to panic and buy safe haven currencies you will start to see trade opportunities almost daily as the headlines appear and the prices react.

As you can see, day trading the news feed does not always apply to some of the technical concepts we have talked about in other Wikis. The main focus is on the fundamental or sentiment reason for the trade rather than where you should specifically get in or get out. It is very important to understand that trading with the fundamentals or sentiment is not something that can be turned into a mechanical system or method that you do blindly over and over again. Rather, it is something that you will get better and better at over time by applying the correct concepts and then practicing and learning from each trade you take.

To get a good feel for how this plays out let's go to the feed and look at the kind of things that we could use to find a possible trade opportunity to give you a good starting point.

How to Scalp Using Real Time News Feeds

The concept of scalping the real time news feeds is that you intensely monitor the news feeds for any information that could change the current market sentiment and drive the price of a currency over a short period of time within the trading session.

The kind of news that you want to look out for are:

Comments from central bank members that have a different tone from how that specific member usually talks. For example; dovish comments from a central bank member that is known to be hawkish.
Another would be a geopolitical event like war.
Debt ceiling issues.
Political leaders saying things that can change the amount of money within the economy such as new bills or legislation.
Pandemic concerns.

The key here is the market needs to have its expectations abruptly changed in the short term. These news trades are short term trades looking for 10-40 pips depending on how large the average daily range for the pair is. The larger the range of the pair then the more potential pips there could be in a scalp trade. The smaller the average daily range of the pair then the fewer potential pips there might be in a scalp trade.

In order to trade these you simply need to know what is normal to the market and what is not normal and that means you need to be in tune with the market. This will take time and experience in watching how these real time news events play out.

Related Wikis

Readers of Trading with the News Feed also viewed:

Fundamental and Sentiment Trading Strategies
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@@ Line 1: / Line 1: @@
@@ Line 7: / Line 8: @@
+='''Trading with the News Feed'''=
+Most traders working at [[Trader_Scouting_and_Prop_Firms_Overview_and_Comparison | professional firms]] become [[Trader_Types#Day_Traders | day traders]] because this is a good combination of regular [[trading]] activity while keeping [[Risk | risks]] limited.  The [[Trading_Tools#News_Feeds | news feeds]] are the main source of all our information and [[trading]] opportunities.  Without these [[Trading_Tools#News_Feeds | feeds]] you would be effectively [[trading]] blind so we will now look at finding trades that come from the [[Trading_Tools#News_Feeds | news feeds]] each day.
+[[Trader_Types#Day_Traders | Day trading]] the [[Trading_Tools#News_Feeds | news feeds]] is actually fairly simple and is one of the best ways to find high quality [[trading]] setups.  [[Trader_Types#Day_Traders | Day trading]] is not as precise as [[trading]] and [[Trader_Types#Scalpers | scalping]] key levels because the main thing behind a successful trade is not the place that you enter but rather the reasons for the move.
+Let’s walk through a typical day of scanning the [[Trading_Tools#News_Feeds | news feed]] to get an idea of the type of things we are looking for.
+Your analysis starts an hour or two before the [[Forex_Trading_Sessions | session]] opens as you are reading the overnight or [[Forex_Trading_Sessions | pre-session]] [[Economic_data_releases | news]] and you are looking for core items that [[Institutional_and_Retail_Traders | traders]] getting to their desks are likely to react to.  This does take practice to master but the golden [[Trading_Rules_to_Live_By | rule]] of [[Sentiment_Analysis | sentiment]] is that the more something is known the less of an impact it will have on the market.
+You are looking for surprises or changes in the tone from [[Central_banks | central banks]] or even [[Economic_data_releases | breaking news]] that could change the [[Speculating | markets view]] on a specific [[currency]] or how the [[Central_banks | central bank]] may approach its [[Monetary_Policy_Tools#Interest_Rates | interest rate]] adjustments in the future.  If you see something of note then the next step is to [[Having_an_Edge_in_your_Trading | plan]] your trade.
+At this point, you may have found a trade and you can either jump straight into at the current market [[Price_Action_Analysis | price]] or try to wait for the [[Price_Action_Analysis | price]] to [[Retracements | pullback]] to a nearby level of [[Support_and_Resistance | support or resistance]].  The [[risk]] of jumping in is that the [[Price_Action_Analysis | price]] might [[Retracements | pullback]] first and you could potentially be sitting in drawdown which means you will need a larger stop loss to accommodate for this.  The [[risk]] of waiting for a [[Retracements | pullback]] is that you might miss the move simply because there may not be a [[Retracements | pullback]] given a clear reason to trade it from the open.
+How do you decide what to do in this scenario?  The best way to know how to react to the details of market information is simply practice and experience... Sorry, but that is simply what any profitable trading strategy is going to come down to; Practice and Experience.  For example, the first time you see a [[Safe_Haven_Flows | safe haven flow]] you may think that the market has gone too far too fast but it then continues for several hundred more pips before thinking about [[Retracements | pulling back]].  We can sit here and tell you all about how aggressive proper [[Safe_Haven_Flows | safe haven flows]] tend to be but until you have actually seen one in full force in live market action you won’t fully understand the concept.
+Remember, you are now past the training stage and as soon as you start placing trades on your [[The_Best_and_Most_Popular_Forex_Platforms_for_Demo | practice account]] you will be at the skill building stage which is where you will develop your experience.  One of the best ways to build your skills is to practice them in the live markets as much as possible.
+'''Trading Tip:'''
+One tip to help your [[trading]] in the early stages is to split your position into two pieces.  You can enter one at market and enter the other at your proposed area of [[Support_and_Resistance | support or resistance]] should the pair [[Retracements | pullback]] to that level.  This gives you two chances to jump into a trade but only [[Risk | risking]] one full unit of [[risk]].  If the trade takes off straight away then you get to at least make a half profit and if it [[Retracements | pulls back]] you average your positions at a slightly worse [[Price_Action_Analysis | price]] than the area of [[Support_and_Resistance | support or resistance]] would have offered but you still are only [[Risk | risking]] one unit of [[risk]] on the [[The_Best_and_Most_Popular_Forex_Platforms_for_Demo | account]].
+This is only a starting technique to assist you in the early months because after a while you will start to see a pattern in your [[trading]] that will give you a natural confidence of when to trade and place your orders.  This will give you a nice day trade that you can hold as the [[Forex_Trading_Sessions | session]] plays out.  Because you are tracking every trade this will also give you lots of [[Economic_data_releases | data]] to look back over to see if over the long run if it would be more profitable for you to jump straight in or wait for the [[Retracements | pullback]].
+Obviously, you will need to have a stop loss in place and a take profit in mind.  Generally, you want your stop loss orders to be between 25-50% of the [[Technical_Analysis#Average_Daily_Range | average daily range]] away from your entry and your target should be where the market has reacted from in the most [[Forex_Trading_Sessions | recent sessions]].  It’s generally not effective to try and day trade past an established high or low because this will result in losses and not cashing in on good trades at the appropriate times.  The best technique is to take your trade-off just before the top or bottom of these levels.  It is never wise to think the market will make a new reaction high or low unless there is something extreme happening at that time.
+'''What happens if you do not see a trade at the opening of the session?'''
+You keep watching the [[Trading_Tools#News_Feeds | news feed]] and switch to a mode where you are looking for surprises or comments that the markets are not expecting but will [[Speculating | view]] as fresh reasons to trade a pair in a certain direction.  These come through as headlines and there are no set standards of news or phrases we can list but the golden [[Trading_Rules_to_Live_By | rules]] of [[Sentiment_Analysis | sentiment]] are key here.
+Generally, we are looking for an announcement from a [[Central_banks | central banker]] or comments from someone else closely related.  For example, look for things like a [[Hawks_and_Doves | dove]] commenting that rate hikes should be coming sooner or a [[Hawks_and_Doves | hawk]] stating that there is a strong reason for rate cuts.  These are things that can be perceived as out of line with their traditional stance.
+Typically, the premium [[Trading_Tools#News_Feeds | news feeds]] will have a list of the current [[Hawks_and_Doves | hawks]] and doves for each [[Central_banks | central bank]] as part of their service.  However, you can get a list by doing a Google search just as easily.
+This is something that you will get better at over time so we suggest that you make this one of your staple strategies and start practicing it straight away.  By keeping your eyes on the [[Trading_Tools#News_Feeds | feed]] for these types of comments or for [[Economic_data_releases | breaking news]] that could cause the markets to [[Trading_psychology | panic]] and buy [[Safe_Haven_Flows | safe haven currencies]] you will start to see trade opportunities almost daily as the headlines appear and the [[Price_Action_Analysis | prices]] react.
+As you can see, [[Trader_Types#Day_Traders | day trading]] the [[Trading_Tools#News_Feeds | news feed]] does not always apply to some of the [[Technical_Analysis | technical concepts]] we have talked about in other Wikis.  The main [[Trading_psychology#10._Regaining_Focus | focus]] is on the [[Fundamental_Analysis | fundamental]] or [[Sentiment_Analysis | sentiment]] reason for the trade rather than where you should specifically get in or get out.  It is very important to understand that [[trading]] with the [[Fundamental_Analysis | fundamentals]] or [[Sentiment_Analysis | sentiment]] is not something that can be turned into a mechanical system or method that you do blindly over and over again.  Rather, it is something that you will get better and better at over time by applying the correct concepts and then practicing and learning from each trade you take.
+To get a good [[Trading_psychology | feel]] for how this plays out let's go to the [[Trading_Tools#News_Feeds | feed]] and look at the kind of things that we could use to find a possible trade opportunity to give you a good starting point.
+==How to Scalp Using Real Time News Feeds==
+The concept of [[Trader_Types#Scalpers | scalping]] the real time [[Trading_Tools#News_Feeds | news feeds]] is that you intensely monitor the [[Trading_Tools#News_Feeds | news feeds]] for any information that could change the current market [[Sentiment_Analysis | sentiment]] and drive the [[Price_Action_Analysis | price]] of a [[currency]] over a short period of time within the [[Forex_Trading_Sessions | trading session]].
+The kind of [[Economic_data_releases | news]] that you want to look out for are:
+* Comments from [[Central_banks | central bank]] members that have a different tone from how that specific member usually talks.  For example; [[Hawks_and_Doves | dovish]] comments from a [[Central_banks | central bank]] member that is known to be [[Hawks_and_Doves | hawkish]].
+* Another would be a geopolitical event like war.
+* Debt ceiling issues.
+* Political leaders saying things that can change the amount of money within the economy such as new bills or legislation.
+* Pandemic concerns.
+The key here is the market needs to have its expectations abruptly changed in the short term.  These news trades are short term trades looking for 10-40 pips depending on how large the [[Technical_Analysis#Average_Daily_Range | average daily range]] for the pair is.  The larger the range of the pair then the more potential pips there could be in a [[Trader_Types#Scalpers | scalp]] trade.  The smaller the [[Technical_Analysis#Average_Daily_Range | average daily range]] of the pair then the fewer potential pips there might be in a [[Trader_Types#Scalpers | scalp]] trade.
+In order to trade these you simply need to know what is normal to the market and what is not normal and that means you need to be in tune with the market.  This will take time and experience in watching how these real time [[Economic_data_releases | news events]] play out.
@@ Line 16: / Line 73: @@
 Readers of '''Trading with the News Feed''' also viewed:
-* [[]]
+* [[Fundamental and Sentiment Trading Strategies]]
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