In this article, I will discuss three ways how you can take advantage trading forex during economic news releases.
Trading the economic numbers
Straddle setup before the news
Hedge setup before the news
1) Trading the economic numbers strategy Currency traders try to take advantage of the discrepancy between the forecasted and the actual economic number, you need a very fast news data feed such as Reuters or Bloomberg because you want to get in the trade before the move begins. Steps to trade the economic data numbers: 1. Purchase a fast news datafeed at Reuters or Bloomberg
2. Track the news consensus and determine the significance of the economic news report being released, if it is not important, do not trade it.
You will be able to find all important data on a good economic data calendar
3. For each important news release you need to know how large a discrepancy has to be in order for you to act on the trade.
4. Finally, watch the news release using your fast datafeed and trade the numbers.
2) Straddle the News strategy This strategy is very simple and consists of 2 limit orders, one to buy a few pips above the range high and one to sell a few pips below the range low, then wait for the price to breakout triggering one of your orders. Your stop loss order should be placed a few pips below the range low when buying, conversely, a stop loss order should be placed a few pips above the range high when selling.
3) Hedging the News strategy What is hedging? Hedging enables a currency trader to simultaneously hold Buy and Sell positions in the same currency pair at the same time in one trading account. 1. To hedge, go both long and short at market price 30 min before the news release.
2. Add a protective stop loss order to both long and short positions 30 seconds before the news release.
3. Add a limit order to both long and short positions 30 seconds before the news release.