Important News Trading Strategy

Important Forex News trading strategy — developed specifically to trade Forex news with as little risk as possible. It can be used only for important Forex news releases such as U.S. GDP, non-farm payrolls and interest rate decisions. Although all currency pairs react on such news, the USD-based currency pairs show the best result.

Features

• Trades will have fundamental background.
• Not very hard to set up.
• High success rate.
• Important news events are quite rare.
• High volatility and spread widening during important news releases.

How to Trade?

1. Choose an important news release that has an effect on the Forex pairs.
2. For EUR/USD I recommend: U.S. GDP, U.S. nonfarm payrolls, U.S. interest rate decisions, Eurozone interest rate decisions and U.S. budget deficit reports.
3. Enter both Long and Short positions approximately 30 minutes before the releases (to protect yourself from slippage and ungodly spreads).
4. Stop-loss for the Long position should be set around the 1-2 hour local minimum.
5. Stop-loss for the Song position should be set around the 1-2 hour local maximum.
6. Take-profit for both positions should be set at least to twice the level of stop-loss. I'd recommend even setting it to 3 * SL.
7. Don't forget to cancel the untriggered orders after the news went out.

Example

The example chart depicts EUR/USD M15 behavior during the interest rate decision announcement by the FOMC on September 23rd, 2009. Both stop-loss levels are clearly visible in this situation. The conservative take-profit levels are easily hit. Only Long position triggers a TP, while the Short one is closed by SL.

It's possible to trade such news with the pending orders for more potential profit (setting entry points at the same levels as the stop-loss levels are set for the opposite position). But it's more risky.

Warning!

Discussion:

Do you have any suggestions or questions regarding this strategy? You can always discuss Important News Trading Strategy with the fellow Forex traders on the Trading Systems and Strategies forum.