More Trading Ideas for News Releases

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Following an economic news release, you can then open spread bets based on the idea that after the spread betting market has finally decide the true impacts of a major news item, it will finally choose its preferred price direction. If you use this technique then you will gain the benefit of not having to contend directly with all the emotional stress that can exist about the release and just afterwards.

To activate this strategy, you simply must wait until about 20 minutes after the posting and then open a spread bet in the current direction of the price of the underlying asset that has been most influenced by the release. However, you must still assert caution if you use this trading method just after the release of very important news items, such as the US non-farm payroll. This is because such events can produce extensive volatility that could take even longer to settle down.

 

Exploiting Retracements

You can also attempt to trade news releases by opening a spread bet in the initial direction of an asset after a retracement. Fundamentally, should the released number significantly differ from its anticipated value then this result usually generates a price spike in one direction or other depending on the result. In many instances, the initial price surge is often quickly followed by a complete reversal, generally as the result of profit taking.

Consequently, you are advised to wait for confirmation that this retracement is fully completed before opening a new spread bet in the original direction of the initial surge. By doing so, your trade should enjoy an increased risk to reward ratio as a result. As there is no exact method that you can employ to identify the precise end of the reversal, many experts recommend using either of the following two strategies:

1. The first technique that you can try is to search for signals that indicate that the reversal is beginning to consolidate.

2. Otherwise, you can attempt to wait for the asset to recommence moving in its original direction by a pre-determined amount, e.g. wait till it has recovered half of the retracement.

In addition, you find that a very good spot to locate your stop-loss order will be just below the bottom point of the retracement, in the case of a long spread bet.

 

Before the Release

You can also design a spread betting strategy based on the concept that often before the release of important news items, assets have a tendency to start range-trading within a tight consolidation pattern. The following diagram shows an example of this when traders were waiting for a US Fed decision to provide them with the confidence to either execute a short or long spread bet based on the EUR/USD.

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This trading phenomenon is caused by traders waiting for the anticipated news release to provide them with the information to determine in which direction to push the price. Consequently, if you can confirm that an asset is range trading by detecting a price ceiling (resistance) and floor (support), then you could gain some worthwhile profits before the news event even occurs. However, you should be aware that price has a tendency to drift in one direction or the other just before the event.

For example, if traders expect that an US news item will be positive, then the EUR/USD may begin to display a sequence of lower lows and lower highs. However, although fakeouts can sometimes happen during these times, they seldom develop into full breakouts before the news events occurs.

You must understand that using such a spread betting strategy entails some dangers because economic data postings are notorious for producing wild fluctuations in price. This is because spread betters often take a snapshot view of the headlines of the release before completely reversing their opinion soon after they have studied the details more thoroughly.

Consequently, you will have to utilize a well-tested money management strategy to counter this problem. However, you should not be deterred by all this difficulties because trading news releases can be a very profitable strategy, if utilized correctly. Fundamentally, there are three major techniques of performing this type of trading which are: pre, post and spike trading. As the last one is deemed to be complex, you should concentrate on the ideas expressed in this article for trading the other two.

 

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