Should you trade the news?
In this weekly video:
00:29 – News trading – does it work?
00:58 – Or are you a technical Forex trader?
01:38 – Trading the US jobs news
02:20 – Australian employment data
04:18 – The choice is yours
05:19 – Send me your trading questions to [email protected]
As a trader should you trade the news announcements or not? Let's talk about that and more right now.
Hey traders, Andrew Mitchem here, the Forex Trading Coach with video and podcast number 299.
So today I want to talk about news and trading around the news. Should you do it? Should you look at trading those high impact news announcements that come out every day of the trading week or not?
News trading – does it work?
Really, it depends on you as a trader as a person whether you want to or not. So really, if you're not sure a news trader or a fundamental trader is someone who trades news announcements. It basically becomes an opinion on whether you think that news is good or bad for a currency. You get the high impact news announcements like interest rates, employment, those type of things. Or you are a technical trader, like I am.
Or are you a technical Forex trader?
The technical trader looks at charts and looks at patterns and price action and price levels and technical indicators and you make your trading decisions from there.
Of course, some people can use both. Although I'm a technical trader, of course I am aware of the news announcements and what's coming up and which currency they are likely to affect. I go and check what those results are. But the fundamentals do not affect my trading; I'm purely a technical trader. Because for me the charts tell me everything I need to know. Now, as a fundamental trader years ago … 10, 12, 14 years ago, I used to trade nonfarm payrolls and nonfarm employment change.
Trading the US jobs news
First Friday of each month, US employment data. You speak absolutely easy, used to make a fortune from it, because you'd put a straddle on, a buy and sell stop, and the market would just break out massively one way or the other. I used to make a lot of money.
But of course today, brokers have wised up on things like that. It's very hard to take straddle trades. The price can sometimes freeze on your charts around the high impact news times. The spreads can massively widen. All those kind of things. So that was a long time ago when that was easy to trade. Today it's very, very different.
Australian employment data
To give you an example, just yesterday on Thursday there was the Australian employment data came out. Now, a lot of jobs got created, far more than expected. The unemployment went down. So very, very good news for the Australian economy. However, on Wednesday on my membership site, and actually on the free information I post on various websites, I suggested buying the Australian Dollar against the US and against the Yen. But for my clients as a specific trade we had buy the Australian Dollar/US Dollar at these levels and the market order stop loss here and profit timing there and the reasons why. It's all taught in the course. Real simple. But we had an Australian Dollar/US Dollar buy trade on the daily chart based off the close of Tuesday's candle for Wednesday trading session.
Yesterday, that trade hit the full profit target for a 3.2:1 reward to risk. So if you take a 1% risk on that trade, it made you 3.2% account gain. I took a 0.5% risk so it made a 1.6% account gain from that one trade, which took me about 30 seconds to see and about another 30 seconds to place on my platform. A 1.6% account gain. Simple. Yes, it took just over a day to get there. But the thing that I'm wanting to let you know is that we were seeing the strength in the Australian Dollar over a day before the announcement came out. The announcement came out and the Australian Dollar went up against the US. But we were in the trade long before that. No stressing around news time, no worrying about the spreads or the price freezing or any of that.
The choice is yours
So I'm not going to tell you that news trading is no good and don't do it. Many people like to tell you out there online that technical trading is no good and you shouldn't do it. A lot of news traders will tell you that. Now, it's a bit like skiers and snowboarders, or rugby and rugby league or different things. To me, we're all doing the same thing. We have the same passion, the same enjoyment. So I'm not going to tell you that you shouldn't be a fundamental trader just because I'm not. I don't believe in that. Like I said, a lot of people mistakenly and wrongly, in my opinion, do that. If you find technical trading works for you, be a technical trader. If you find that fundamental trading works for you, be a fundamental trader. If you like the blend of the two, do that. Whatever works for you.
All I'm saying is that for me, as a technical trader, the charts tell me everything that I need to know. I know when to take a trade, where my stops should be, where my profit target should be. I know my risk, I know everything well in advance without any stress about having to worry about any news or anything like that.
So I hope that helps. Now, next week is video and podcast number 300.
Send me your trading questions to [email protected]
If you have any trading questions at all, anything you'd like my opinion on, then feel free to send me an email [email protected] I will cover your questions and topics and trading information over the next few videos and podcasts.
So I hope that helps. This is Andrew Mitchem, the Forex Trading Coach, have a great weekend. I'll see you at this time next week.