How to trade the Daily Trading Signals

News trading can make or lose a lot of money very quickly. If you don't understand the terminology, you will be much more likely to lose.

First, you must understand the terms deviation, revision, and trigger.

For most news announcements, there is an expected number. This expectation is the average taken from a number of expert news analysts. The amount the actual number released differs from the expected number is called the deviation. If most of the experts agree on a very narrow range, then the pre-news market action usually won’t be as volatile, and reaction to a large deviation should be greater. If expert estimates are all over the place, then the market can get very jittery before the news comes out and reaction to the news can be much less predictable.

A revision is a recalculation of the previously released number. The monthly released number for employment, unemployment, consumer confidence, etc., is usually just a very good estimate. The next month, whatever group or agency released the data will update (revise) the prior number, usually at the same time they release the new one. Obviously, some numbers (like an Interest Rate Statement) are not subject to revision.

Large revisions can have very strange effects on the market. For example, if a county’s employment numbers were up by 20,000 last month and are up by 40,000 this month, that would show not only new employment, but solid growth in employment – this is usually good for a nation’s currency. If last months number is revised from 20,000 to 25,000, that would probably be considered even better. On the other hand, if last month’s number is revised down to 1000, traders could interpret this month’s numbers as so much better, or could lose confidence in the accuracy of this month’s numbers. If last month’s number was revised upward to 60,000, this would mean that more people are working (good!), but that this month’s numbers are actually a decline in the rate of job creation (bad!) and that the current release isn’t very trustworthy (confusing!). This at least partially explains some of the wild price swings when there is a large revision in the previous release.

Placing a trade is also called “pulling the trigger.” A news trigger is the minimum amount of deviation to make it worth placing a news trade. For example, the Daily Signals might say this month’s Canadian Beer Exports are expected at 3.2 million cases, and that there’s a 0.5 trigger. This means that a deviation of greater than 0.5 or less that negative 0.5 means you should place a trade. More directly, buy the CAD if production is 3.7 million cases or more, and sell the CAD if the number comes out at 2.7 million cases or less. The Daily Signals will tell you if you should be trading the USDCAD, AUDCAD, or some other pair for this specific report. (Disclaimer for the humor impaired – there is no monthly Canadian Beer Export report, but there should be!).

Depending on the currency pair, you might need to reverse the direction of your trade. For example, if there is a strong positive deviation in the quarterly Wool Production Report out of New Zealand (yes, this one is also a report I made up), you would expect the NZD to gain value when the report is released. This would mean buying the NZDUSD (or other NZDxxx pairs) or selling the AUDNZD (or other xxxNZD pairs). Similarly, reports that are good news for the USD mean to buy USDxxx or sell xxxUSD.

Just to really mess things up more, there are often multiple reports released at the same time. Usually, news traders will focus on only one report, but if other reports affecting the currency come out the other way, then price action can be unexpected. For example, one of the “Big 3” reports every month is US Core Retail Sales (also called Retail Sales ex-Auto). Since car sales are quite variable, it is simply the estimated amount of retails sales for the month excluding automobile sales. If the total Retail Sales deviates strongly in the opposite direction as Core Retail Sales, this can make price movement less predictable. The Retail Sales Report (which includes cars) is called the Headline Report, since it will be the one that newspapers (but not forex traders) will focus on.

There are many ways to place trades around news time. I will describe three of the most common, each based on a different time to place the trade:

Placing pending orders each way is called a straddle. People who do this usually place the pending orders about 3-5 minutes before the news is released. Stops and targets will vary quite a bit depending on the nature of the news report. The advantage of a straddle is that if there is solid movement in one direction, only one order triggers and (if the movement is far enough) your order closes with a nice profit. The risk of a straddle is that widening spreads and erratic price action can stop out in both orders.

You can try to get the news information and place a trade before most of the market has a chance to react. This is called spike trading. To do this, you need a fast internet connection, a way to get the news very quickly, and (if possible) a way to automatically place the trade depending on if the news deviation is big enough and in what direction the deviation is. There are companies you can buy news feeds from. There are several autoclicker software packages out there that can be used to partially or fully automate placing the trades. Or, you can get extremely fast news combined with automatic placement of your news trade orders in one package from Secret News Weapon or a similar service.

The third common way to trade the news is to wait for the initial spike to happen, then try to catch price movement back towards the pre-news price (price action back towards the pre-news price is called retrace). Learning to trade the retrace is something you can do by watching and demo trading (do NOT trade real money while learning to do this) over a period of time. Also, many trading rooms such as Forex Diamonds try to trade the post-spike retrace.


Other news trading questions I’ve seen from time to time:

What time zone are the Daily Trading Signals based on?

All Daily Signals trades by Sir Pips and Crazy Cat are in US Eastern Time - New York Time. I personally find this convenient, since Florida is in the same time zone.

Where do the released news numbers come from?

Most of the numbers come from some government agency in the country that the news release is from. Some come from private groups.

What does m/m, q/q, and y/y mean?

Those are short for month to month, quarter to quarter, and year to year. Or, to put it more simply, these would mean monthly, quarterly, and yearly reports.

Why can’t the Daily Signals give entry price, target, and stoploss for news trades?

The Daily Trading Signals are issued many hours before the news comes out, so there’s no way to know what the price will be when the time comes to enter. Targets from entries are given if the trigger number is reached or exceeded and you can get in before the spike. Stoploss would be hard to give, since different brokers widen their spreads by different amounts. 25 pips might work great for one broker, but will get taken out by wider spreads at another.

What are basis points?

Interest rate changes can be described as fractions of a percent or as basis points. A 1/4% (or 0.25%) change can also be called a 25 basis points change.

Where can I see a list of news reports?




Remember, if you are just learning to trade the news, start with demo trading just to familiarize yourself with market reactions to news events. When you move to live trading, remember that slippage and requotes will be MUCH worse than demo trading, so only risk the smallest amounts of money at first. Please read my article about Risk Management if you have any questions about this. Also, if you don't understand a particular trading signal, don't trade it with real money. It's much better to risk missing out on some profit than to risk throwing away your money on a misunderstanding.

Simple System for the Swing trader

Swing trading can be highly effective in forex markets enabling you to trade with low risk and high rewards.
Swing trading is however misunderstood by many traders and they lose.
Here we will look at a specific method to swing trade that will give you low risk and high reward.
Swing trading
Takes advantage of corrections in value sideways or strongly trending markets and a typical trade will last 2 – 5 days.
Many traders think they can swing trade on a daily basis but this will just see you lose your equity quickly.
Day trading no matter what system you use is a mugs game, as volatility within a day is totally random and levels have no significance.
If you want proof then ask a day trader for a real time track record of profits and you won’t get one.
Now let’s get started on a simple 3 point method to swing trade.
1. Establish valid support and resistance
You are looking for support or resistance that has been tested and held on several occasions preferably at new chart highs or lows.
2. Watch Momentum
Watch prices move strongly toward the support or resistance and look for confirmation that price momentum is going to turn.
This is the critical point!
You need CONFIRMATION that price momentum is waning, a turn is likely and the odds favour a swing trade.
You want some evidence that price momentum is not strong enough to take out support or resistance.
The best indicator for this is the stochastic indicator – It’s the ultimate indicator to time a swing trade and if you don’t know how it works learn about it from our other articles.
The stochastic is a visual indicator and here we will simply look at the visual set up you need.
When the market is for example trending up to resistance, the stochastic lines will both normally point up. When the market is moving down the opposite set up will apply.
The signal you are looking for is:
For the stochastic lines to cross each other and point either up (bullish divergence) to show support has held or cross and point down (bearish divergence) to show resistance has held - This is your signal to take the trade.
You can see this set up on any free chart service and one of the best is futuresource.com.
3. Target
When you have entered a trade you need a target.
Next pull up the Bollinger band.
If you have had a quick volatile move to test support or resistance, prices will be normally at the top or bottom of the band.
Look for prices to return to the middle band and make this your target.
Don’t hang around and trail stops.
As soon as you hit this band or near it take profit.
Other points
1. Only trade sharp volatile moves into valid and significant support and resistance.
2. Always wait for a stochastic crossover to enter don’t predict.
3. Set a target and get out.
A typical swing trade will last for around 2 – 4 trading days.
If you look for set ups that meet the above criteria you can get some low risk high reward trades that will build significant profits over time.

WHY YOU SHOULD TRADE FOREX

MANY REASONS WHY FOREX IS THE BEST OPTION FOR YOUR FINANCIAL FREEDOM


Consider the Following and Judge for Yourself

- You are your own boss!
- You don’t need any customers!
- You don’t need employees!
- You can operate from home, work, vacation or anywhere else in the world as long as you have a high-speed Internet connection.
- You never have to worry about job security, harassment or any other employment-related anxiety.
- You never need to worry about employer payroll, strikes, theft, rent increases, health inspectors, lease problems, being sued, etc…
- You don't need to do any cold calling.
- You decide which days you wish to work.
- You make the decision to take a vacation at a moment's notice.
- You are your own boss!

OTHER REASONS TO TRADE FOREX

There are many other benefits and advantages to trading Forex.

Here are just a few reasons why so many people are choosing this market:

No commissions.

No clearing fees,

no exchange fees,

no government fees,

no brokerage fees.

Brokers are compensated for their services through something called the bid-ask spread.

No middlemen. Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.

No fixed lot size.

In the futures markets, lot or contract sizes are determined by the exchanges.

A standard-size contract for silver futures is 5000 ounces. In spot Forex, you determine your own lot size. This allows traders to participate with accounts as small as $250 (although we explain later why a $250 account is a bad idea).

Low transaction costs. The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent under normal market conditions. At larger dealers, the spread could be as low as .07 percent. Of course this depends on your leverage and all will be explained later.

A 24-hour market. There is no waiting for the opening bell - from Sunday evening to Friday afternoon EST, the Forex market never sleeps. This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade--morning, noon or night.
No one can corner the market.The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank) can control the market price for an extended period of time.

Leverage.In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. But leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.

High Liquidity.Because the Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will. You are never "stuck" in a trade. You can even set your online trading platform to automatically close your position at your desired profit level (a limit order), and/or close a trade if a trade is going against you (a stop loss order).

Free “Demo” Accounts, News, Charts, and Analysis. Most online Forex brokers offer 'demo' accounts to practice trading, along with breaking Forex news and charting services. All free! These are very valuable resources for “poor” and SMART traders who would like to hone their trading skills with 'play' money before opening a live trading account and risking real money.
“Mini” and “Micro” Trading: You would think that getting started as a currency trader would cost a ton of money. The fact is, compared to trading stocks, options or futures, it doesn't. Online Forex brokers offer "mini" and “micro” trading accounts, some with a minimum account deposit of $300 or less. Now we're not saying you should open an account with the bare minimum but it does makes Forex much more accessible to the average (poorer) individual who doesn't have a lot of start-up trading capital.

Profit Making. Unlike stocks where profits are made only when the market rises, in forex profits are made in both rise and fall of the market

STAY ON AS I GUIDE YOU INTO SHARING IN THE FOREX TRILLIONS DAILY AS I DO

AM DAVID

07068470968