How to use news and information to create an efficient trading strategy?

Recently, the latest economic data released by the United States showed that the September CPI data rose 2.4% year-on-year, higher than the market’s expectations of 2.3%, and the core CPI rose 3.3% year-on-year, higher than the market’s expectations of 3.2% year-on-year. The market’s expectations for the Federal Reserve’s sharp interest rate cut in November have weakened, which accelerated the rise of the US dollar.

This shows that macro news has a great impact on market trends, especially on the eve of major economic data release, market volatility often intensifies. Therefore, EagleTrader will specifically remind candidates to trade carefully during this period to avoid unnecessary losses. In view of this, today we will share some unique trading strategies with you from the perspective of news.

How to trade with news

When faced with news events, our first reaction is often to judge the possible positive or negative impact of the message on the trading symbol, and take corresponding long and short actions based on this. This trading method based on the influence of news direction, which we call directional trading, is a common form of news trading.

In fact, news trading methods are mainly divided into two categories: directional trading and non-directional trading.

directional trading

Directive trading involves predicting the impact of news on the foreign exchange market, and entering the market for trading accordingly, setting a stop-profit and stop loss. But this strategyTwo major challenges are faced: forecasts may be inaccurate, and large financial institutions may have taken action in advance to affect the market.

To improve prediction accuracy, historical data can be used. For example, when predicting non-farm unemployment, analysts often refer to historical trends, and unless they encounter black swan events, the data is mostly continuous.

As for the advance actions of financial institutions, it is difficult to avoid its impact because they have a professional message tracking team. If its predictions are accurate, early trading will weaken the original market trend.

Non-directional trading

Not-directional trading does not require predicting market trends, but orders in both directions at the same time. Monitor market trends in real time. Once you find that the market is clearly moving in one direction, immediately close the orders in the other direction.

The specific operation is as follows:

Entering point settings: If the platform spread is less than 5 points, add 10 points up and down the highest and lowest K-lines before the news is announced according to the minute K-line chart as the entry point; if the spread is large, it will expand to 15-20 points.

Order and Stop Loss: Taking EUR/USD as an example, before the non-agricultural data is released (such as 21:30), based on the highest point and lowest point of the minute chart, buy at the highest point, add 10 points to sell at the lowest point, and set the corresponding stop loss position.

Close position and stop loss adjustment: Within 5 minutes, if the market clearly moves in one direction, close the orders in the other direction. If the market fluctuates, both directions are involved, and after one direction triggers the stop loss, the market turns to the other direction, the stop loss position in the other direction can be appropriately raised to increase profit opportunities and prevent the stop loss from being triggered again.

Potential risks of news trading law

While news trading is full of opportunities, it is accompanied by a series of risks that cannot be ignored:

1. Taiwan fluctuations exceed expectations:

Although you may have already made detailedForward and reverse trading strategies and set reasonable stop-profit and stop-loss points, but complex news events or sudden black swan events may still cause market volatility to exceed your expectations. At this time, the most important thing is to ensure that the losses of each transaction are within a controllable range and strictly manage the risk of position.

1. Delay risk of trading platform:

When major news events cause violent market fluctuations, the trading platform may experience delays, resulting in deviations in transaction execution. As the saying goes, “A slight loss is a thousand miles away.” This delay may trigger transaction errors and increase unnecessary losses.

1. Risks of spread expansion and slippage:

When the market fluctuates significantly, some trader platforms may expand the spread, and even lead to an intensification of slippage. This will not only increase transaction costs, but may also affect the execution effect of trading strategies. It is one of the risks that must be faced in news transactions.

Although the news trading method has its unique features, it is not suitable as the main strategy for trading, but is more suitable as an auxiliary means. Therefore, many traders have the habit of paying attention to the economic calendar in order to keep abreast of market dynamics. On the official website of EagleTrader, we have also specially set up a weekly economic calendar to provide traders with convenient information acquisition channels. Traders in need may wish to pay attention to it frequently so that they can make trading reminders and preparations and seize every market opportunity!