STEP 2 to MASTER TRADING: what to do with the NEWS.
NEWS BRING TERRIBLE TRADING CONDITIONS
During release, spread is all over the place, in addition you can easily miss the fill. So actually worst time you can enter a position is on a release itself, hoping price will rise or fall. But usually, price will make massive moves up and down, liquidating hopeful "news traders" before going in either of direction. So next time when you will regret you were not involved in the news move, just remember that you would not have a good entry point anyway.
PRICE CAN GAP BELOW YOUR STOPLOSS
Another really important thing to keep in mind is that very often during red news, price can momentarily and significantly gap, and now instead of your breakeven or usual -1RR, you'll have -2 or -3RR, and what's worse - you'll have a big drawdown in your emotional capital.
ILLUSION OF UNDERSTANDING
Sometimes beginners, and even advanced traders, fall into this illusion. Someone reads 5 articles about a specific news type, and now begins to think they understand how the news will effect the market.
In reality, each trading instrument is effected by hunderds of factors, and anyone who wants to understand them, should spend months, even years with that one instrument, learning literally everything about it and what effects it. Everything else is just gambling or being naive.
EFFECT HAPPENS BEFORE THE RELEASE
If you've being familiar with smart money or institutional trading, ideas of Wyckoff, you'll know that institutions position themselves long time before news release, during accumulations and distributions. Market structure gets established long before actual realease, and what news do are just producement of sporadic moves, grabs of liquidity and easy manipulations. But only 0.01% of news actually change pre-established structure and starts a new trend, big picture doesn't change because of news. What actually starts a move and a trend are accumulations and distributions, and news really can be a part of it, but only a small part.
SO WHAT TO DO ABOUT THE NEWS?
1. Check red news releases during your day. Don't enter 15-30 min. before and after the news.
2. If you're already in a trade, and price came relatively close to your entry, it's better to close out the position now, because remember that price can gap below your stoploss.
3. If you're positioned in profit significantly away from the price, leave the position open.
So to recap everything above, you need to trade YOUR SYSTEM, YOUR EDGE - for me it's structure, SnD and confirmations - but also we need to acknoledge the short term chaotic news effect, and use our knowledge to manage risk and that's all.
Hope this post give you better understanding what should you do in order to become a successful trader.
I will be grateful if you support this post by smashing the BOOST button and sharing it with other traders. Thank you!
Dima
During release, spread is all over the place, in addition you can easily miss the fill. So actually worst time you can enter a position is on a release itself, hoping price will rise or fall. But usually, price will make massive moves up and down, liquidating hopeful "news traders" before going in either of direction. So next time when you will regret you were not involved in the news move, just remember that you would not have a good entry point anyway.
PRICE CAN GAP BELOW YOUR STOPLOSS
Another really important thing to keep in mind is that very often during red news, price can momentarily and significantly gap, and now instead of your breakeven or usual -1RR, you'll have -2 or -3RR, and what's worse - you'll have a big drawdown in your emotional capital.
ILLUSION OF UNDERSTANDING
Sometimes beginners, and even advanced traders, fall into this illusion. Someone reads 5 articles about a specific news type, and now begins to think they understand how the news will effect the market.
In reality, each trading instrument is effected by hunderds of factors, and anyone who wants to understand them, should spend months, even years with that one instrument, learning literally everything about it and what effects it. Everything else is just gambling or being naive.
EFFECT HAPPENS BEFORE THE RELEASE
If you've being familiar with smart money or institutional trading, ideas of Wyckoff, you'll know that institutions position themselves long time before news release, during accumulations and distributions. Market structure gets established long before actual realease, and what news do are just producement of sporadic moves, grabs of liquidity and easy manipulations. But only 0.01% of news actually change pre-established structure and starts a new trend, big picture doesn't change because of news. What actually starts a move and a trend are accumulations and distributions, and news really can be a part of it, but only a small part.
SO WHAT TO DO ABOUT THE NEWS?
1. Check red news releases during your day. Don't enter 15-30 min. before and after the news.
2. If you're already in a trade, and price came relatively close to your entry, it's better to close out the position now, because remember that price can gap below your stoploss.
3. If you're positioned in profit significantly away from the price, leave the position open.
So to recap everything above, you need to trade YOUR SYSTEM, YOUR EDGE - for me it's structure, SnD and confirmations - but also we need to acknoledge the short term chaotic news effect, and use our knowledge to manage risk and that's all.
Hope this post give you better understanding what should you do in order to become a successful trader.
I will be grateful if you support this post by smashing the BOOST button and sharing it with other traders. Thank you!
Dima
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.