How to Trade the News — An Exact Method Every Trader Should Know

Let’s discuss “the news-trading”. This strategy refers to a trading method that only used near the news release.

There seems to be a lot of different ways that you could trade the news, name one of such, bracket trades. The plan is that you can look at the direction that goes and try to trade with it.

Yet, we have a completely different take on how to trade the news. We don’t think the right way to go is following the cows, following the herd as it goes up or as it goes down.

We believe there’s a smarter way to trade the news. So, what we want to show you is how to trade the news properly.

What we want to show you first is an exact way to:

1. Understand when news events are going to come out. There’s a few ways you can get this information, for this article instance, the Bloomberg economic calendar of December 13th, 2011 that we’re looking at and we can see that there is Retail Sales at 8:30 labeled by a red star. So, we use the economic calendar and look at only the red stars because these items right here are market movers.

These are the things that move the market and so we know that there’s a news event occurring ahead of time and we should be prepared for it.

What do we know about trading the news? Well we know that a news event comes out and particularly right before a news event, the market gets very slow. Therefore, we can expect the market to slow down or to tighten or the whipsaw. The channel can absolutely look at a smaller, tighter range occurring before the news, as traders wait for this special number to come out.

We shall wait for the news event to come out and do nothing.

So as you see it here this large red candle right here was the result of whatever economic news event occurred whether it was good news or bad news it doesn’t matter. This red candle is the result of whatever the report stated.

Now, this typically what happens: I do not know the future when a news event comes out; and it’s a red bar; a lot of traders say well this markets going to go down; I’m jumping in short.

Yet, really there is no known fact that a negative news report will result into a downward market or a guaranteed result that it a positive news event is going to result into the market going up. We really can’t base what we’re trading on that alone.

2. Now we relate to this candle as a chaotic candle based on a news event occurring and we look at it as if being red or green.

Since we concentrate them, trading price and price action, we’re not using any indicators whatsoever. That’s the beauty about the way we trade here. There are absolutely no indicators used. This particular method is only using price to dictate what we do moving forward.

3.Verify the candle; whether it is red/bearish or green/bullish.

In this case, simply it’s a red candle (look at the image) and therefore we’re not going short. We’re going long. We want to do the absolute opposite of this candle reaction to the news.

But we’re going to be smart about it. We’re going to do it with specifics objective rules and moving into the future. We want to have proof. We are going to let price prove that to me that we are going long.

4.Open an opposite direction after confirmation

So as the market starts moving into the future, you can see that traders that were short the market based on that news event are now having a little bit of a problem. They have to cover their shorts or get out at a stop or even reverse because the market is not moving in their favor.

Hence what occurs next is that the market explodes to the upside and the reason why you see this large green bar as a result of the traders who got in short initially based on the news event being wrong and having their stops hit or hitting that reverse button and initiating a huge move in the opposite direction.

Bottom Line

We’re entering long this market when two consecutive bars close on the opposite side of the highest high of the red bar (chaotic candle).

Note: if this was a reverse, if that candle was green that in that initial move of the market reaction to the news was green, We’d look to be doing the absolute opposite. We’re looking to go short when two consecutive bars close below the lowest low of that green bar.

So in this case, this happened to be a bullish move to the upside and it occurred because of that news event effect.

Now as you can see that the market exploded to the upside We think this is a very direct way to trade the news. It takes all the guessing out. It’s objective. It’s clean. We know why we’re entering and we have the proof.

 

Charting Strategy – Forex Strategy for Traders

One who decided to be a Forex trader need to be concerned with charting in order to invest in a good price. It is important to be extensively involved with the latest techniques in order to have a solid knowledge of when to invest in a security. The chart technique basically allows a good prediction to discover a corresponding course for themselves. Beginners use different brokers to get a good start into the charting technique. After all, a little background knowledge must be available, how to deal with the chart s and what signals must be respected.

The technical analysis
The technical analysis is an integral part of the financial markets. Since the beginning of the twentieth century, investors have tried to capture particular ratios of values and thus to ensure that good entry opportunities for trading are found. Extensive studies are used to clarify fundamental key figures of a market or a company and to use these for forecasts. Price progressions are statistics that lead to clear signals using the indicator analysis. The basic assumption of the charting technique is that the past price trajectories of the past are repeated. Professional traders have noted points in charts, which must be kept as special instructions in mind. Important methods in the charting technique must be taken into account in order to be able to continue to value the course. Especially the following point should never be forgotten.

The trend is your friend
The basic rule for the charting technique and the analysis of the technical data is the saying “The trend is your friend” . This proverb is used permanently in chart analysis to make it clear that you should not oppose a trend. Striking movements should not be strengthened in their opposition, as the same trend direction is usually maintained. If a stronger movement should be the case, it is a turning point, which is signaled prematurely. Different extreme points are marked in an analysis in order to recognize significant changes early on. If there is a series of trends with many highs, a downtrend can be detected. But alsoSideways trends are present when a course is on the same summit for a long time, making only light swinging movements. A straight line can then be introduced to the charts, which gives a clear indication of a sideways trend. Basically, charts can run in three directions:
1. up
2. Down
3. Sideways
These movements can be detected in the chart analysis with different tools. Mostly the Bollinger Bands used to ensure high, medium and low stock price marking. It is important that the different trends are clearly defined, thus ensuring that the trend has a longer validity. A trend is then present until it breaks through the price charts and can be seen below or above the curve. It is important that the outbreak only happens after use. Here it is sufficient that the course is noted once a day in order to detect possible changes. According to experts, the last markings should be carried out after the closing price. Other experts see a trend as completed only when the price is up to three percent below or above the trend line that has existed so far.

Highs and lows
When analyzing the current prices, the high and low points are usually considered a bit closer to define trend lines. When it comes to securing and fixing price targets for a stock, the highest and lowest points can be used as a good guideline. If a chart assumes a downward movement, then a low should be detected, which develops from the point upwards. The low usually uses a support. Courses can rotate frequently and develop against a trend line.Once the price has changed, it usually will not change again. Support in this context is stronger the more it has served as a turning point. This can be recognized directly, if the past of the current values continues to be looked at. In addition, the price history is often repeated, which is why chart analysis experts would like to look at the past history of the course to make forecasts. The analysis should not only look at the values of a course from the last hour, but it is also important to look at the values of the past few days. Depending on the forecast period, the last period should be considered closer to use similar values as support.
The specialist uses resistance as an important factor in the analysis of a chart, which can help in the analysis. For this purpose, a resistance line is drawn, which is used as an obstacle within an upward movement. In a long-term chart, a breakthrough can be well recognized . For future charts, it will usually be hard to skip a certain area permanently. However, if the break of the resistance line can happen, the drawn directive can be used as a support line. This swap is a secure methodology for chart analysis. It should be noted here:
• Like previous support, the uptrend line can turn into a resistance when it has broken down
• Resistance lines and downtrend lines serve as support for the course after a breakthrough

When is a trend over?
Most traders do not just need to know when a trend starts, but when it stops. It will be asked what indicators for this findingmust be used. Some formations that can be recognized in a chart confirm a trend reversal. This includes the V formation. This term comes because of the sudden potential trend reversal, which can lead to a rapid downward or upward movement. Countermovements seem to look like a V quickly, which is the case in a fast rise. On a descent or fall of the course an A-formation can be seen. Of course, for the trend change, a reliable use of important indicators should be used to quickly detect a possible reversal. In practice, the constellation in this formation is relatively common, so shareholders should be more concerned with the specificity of the formation.

The double bottom
The double bottom is an indication that the formation, which can also be considered the letter W, can be seen in the downtrend. Investors will recognize by the scheme that it is a rising pricewhen the W formation has been completed. The double bottom denotes the double top, where there are two lows, a short rising rebound and another low point. The course floor is not extremely blasted, but the ground is stable and remains in the almost identical values. After the medium recovery has taken place, again a decrease can be detected, which is then associated with a sudden slope. This formation is relatively common, but most will be seen in monthly views, not on individual days.

What are the Factors Affecting Gold Prices?

Gold price varies by its supply-demand. Naturally, the first question that comes to mind is “What is the factors affecting gold supply-demand?”. According to some experts, there are four major factors that affect gold prices. The change in these four basic factors will lead to changes in supply and demand, which will result in changes in gold prices, which is:

  1. Global Inflation
  2. Global Liquidity
  3. Global Geopolitical Risk
  4. Global Real Interest Rates.

 

Let’s dig some deeper insight:

1.Global Inflation

Inflation is the indicator that measures the increase in the general level of prices with the simplest definition. In an environment with inflation, the purchasing power of the money decreases, for example, 2 meters of fabric last year, which we can take up to 10 lira. So in summary, as we mentioned earlier, money has a lowering effect on the purchasing power. That is why investors increase their gold demand to protect their money. It would not be wrong to say that in the environment where global inflation is present, there will be increasing pressure on gold prices.

2.Global Liquidity

Global liquidity and gold prices are directly proportional. As liquidity ratio increases, gold prices are expected to rise and gold prices are expected to decrease as liquidity ratio decreases. If we interpret this in the simplest way; get 10 kg of apple on one side, 10 pounds of apples on the other you can get 10 pounds el apples are still 10kg while all available money to 15 TL to get all of the apples you will have to give the entire 15 lira. In the first case, when the weight of apples is 1 TL, the weight of apples increases to 1.5 TL with increasing money (liquidity). I mean, if there is an increasing supply of money (liquidity) across the limited resource gold, the price of gold will rise. On the contrary, gold prices will move in a downward direction.

3.Global Geopolitical Risk

Gold is the indispensable investment tool of investors in terms of not only global geopolitical risks but also all risks that may occur in the world. In the most remote countries of the world, it can be converted into cash, in the most developed countries. With the fact that gold is so convertible, we can say very clearly that the address of any global risk avoidance will be gold. It would not be wrong to say that global geopolitical risks and gold prices may rise in countries where the gold trade is high. With the simplest example, it is possible to see that even the smallest risk in the region is reflected in the oil prices, as the oil exports of Iraq and Syria, which are in the war now, constitute the most important part of the world’s oil exports.

4.Global Interest Rates

In its simplest definition, the real interest is the cost of the retained money. If you have 100TL money you have not invested in your bank account for 1 year, if you think that the real interest rate is 5%, your money will actually lose 5 TL. I mean, the cost of keeping your money is 5 TL. However, if you invested 100 TL in the rate of 5% real interest rate would be 5TL. As a result of Gold’s own structure, any periodic returns do not provide investors with any interest gains, except for the change in market prices. In a period when real interest rates are in an upward trend, investors prefer investment instruments instead of gold. As a result, it will not be wrong to say that gold prices will move downwards.

These four factors are among the main reasons that directly affect gold prices. Contrary to what most of us know, ”summer is coming, everyone will get gold, gold prices increase“ is absolutely not true.