How to Trade the GDP

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Video Transcription:

Hello traders, welcome to the newest trading course and the third module: News that Move the Market Profitably Enough for us to Trade. In this lesson, I’m going to teach you how to trade the gross domestic product release. And, you need to understand that the GDP doesn’t move the market as much as the previous events, but still you can make a nice 30p profit out of it.

How to Trade GDP

Now, what we’re going to do, we’re going to go through the first [inaudible 00:00:26] factory calendar and as you can see right here, I have filter in only growth events, because I want to filter out everything but preliminary GDP. And you can see right here, the last GDP that we have is the Japanese preliminary GDP, and we had expectations of 0.4% and of course we had a reading of 0.6% with a previous number of 0.4%. So we have a better than expected reading, which is good for the Japanese yen, so we are going to try to immediately buy this currency. And the instrument we are going to use to buy the Japanese yen is the U.S. dollar/Japanese yen. And right here we have the U.S dollar/Japanese yen and this is the time of the release, okay? Right here.

Trading GDP

Now this is the 50 minute chart and of course we are going to choose our levels on the 50 minute chart. We have this level right here, let me just change these lines to a black thick line, because these are our levels of profit taken, and of course on the upside we have to use this level right here. Now, right now we are going to go to the one minute chart, okay? Let me just go to the five minute chart and then to the one minute chart, okay? Okay, so this is where price was trading right before the release, and here we have our levels.

Trading the GDP with Levels

Now, remember that we are going to use immediate levels to place our pending orders and our immediate levels are right here. So the first immediate level or the first level that we need to break is this one, so we are going to use a few pips below this level to put our sell stop, okay. And of course, I’m going to use another color for our buy stop. Now, the buy stop should go about this high and I’m going to use yellow for the buy stop as always. And yellow . . . I’m sorry; I’m going to use green. And of course the stop loss of this should go below the previous base and the stop loss for the sell stop should go above the previous highs.

Now, this gives us . . . I’m sorry, this gives us a nice 5 pip stop loss on the sell side and 7 pip stop loss on the buy side. Now, as you can see, the release is exactly at 2:50 p.m. on my MT4 platforms, and remember that during this time the market is very thin and people are just waiting for the GDP release. So what we are going to wait is for the release and then we are going to get filled as we did right here. Remember that we can use this level right here as our first profit taken, okay, and this would have given us a nice 6 pip win. But, of course, because this is a very nice, or a very important event, I’m sorry; we are going to use our hourly target on the downside. And this means that we are going to place our targets around this level. And as you can see, this is the one minute chart and right here after the events we have a consolidation period. Remember that we are also going to also use consolidation periods and we are going to use corrective moves, in this case to the upside. So this means that when we get this low, we can put on another sell stop, which we get filled and as you can see, the target is hit on the downside on both. Okay?

Now, there is two things we can do here: one put on your stop loss. Let’s grab a red line for our stop losses, okay? So this is the first stop, this is the stop of our first positions. Once we are in the second position, we move our stops to break even, okay? And the stop loss for this position is going to go right here too, okay? So this is where our stops should go. The stop for the first trade, which we are already in, goes to break even when we get filled on our second trade. And as you can see, we have a corrective move to the upside to test these highs again so we don’t get stopped out on a loss, and then we have the flush to the downside. Now, some traders might also want to add right here, but I think that is just stretching too much the trade, and we are just going look for our targets to get hit on both positions. This means we made 16 pips on the first position, and we made 13 pips on the second position for overall win of 29 pips on this GDP trade.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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