Beware the news when trading forex

How many times have you entered a trade when everything is lined up correctly according to your proven profitable system and things start moving nicely, then BANG a news annoucement comes out and sends price in the opposite direction in a big way – stopping you out?

It’s happened to me again and again, and even when I kept telling myself: “you must check for upcoming news annoucements before entering a trade” there were times when I’d forget and I’d get bitten.

It happened so many times that I thought to myself, there must be a way to automate this, so that I don’t have to remember upcoming news announcements.  So, I built that feature into the Trade on Track program – now I never have to worry about checking news calendars again, Trade on Track does it for me!

The way it works is, Trade on Track is continually updated with the most relevant news announcements automatically – you don’t have to do it.  Trade on Track also knows what currencies each news announcement affects, and the relative “strength” that each announcement has on the market.

Then, when you enter a trade – Trade on Track warns you if there is an upcoming news announcement that is likely to affect your trade in a significant way.

An example of this occured yesterday, where there was a near-perfect short entry on the USD/JPY.

USD/JPY Failed Short Trade

USD/JPY Failed Short Trade

The trade looked great, an entry around 109.00 should have seen a move down of at least 50 pips as there were no real support levels until around 108.30.  However, Trade on Track warned of some durable goods orders figures coming out at 8:30am US EDT which could have a significant impact on this trade. As it turned out, the durable goods figures turned out to be a lot better than the consensus – so price shot up going in the opposite direction of our would-be trade.

News announcements and other significant events can have a large impact on the financial markets.  Even if they are not sustained, they can still send price wildly in one or both directions – potentially wiping out your stop loss.  If you’re not taking news annoucements into account when trading the forex – then you could be in for many more losses than you deserve, so BEWARE!

Good luck and trade seriously!

Scalping the London Breakout Fake-out

Ok, this might not be for everyone, especially those in the US, because it’s in the middle of the night or very early in their morning … but, it’s a great trade for us here in the land of Oz, or of course those in Europe.  It’s also not for the feint of heart or those committed to swing or position trading … it’s a trade that needs to be watched like a hawk – perfect for the day traders.

At the start of the London session (or often, an hour or two earlier when Germany / France come in), there’s often a hefty push in one direction – breaking through the high or low of the previous session quite convincingly.  To the beginner, they think “hey, this is really moving, I’m getting onto this one!”, and they go long if the price is breaking to the high side, or they sell if the price is breaking on the low side.  But, the opposite happens, and price makes a hasty retreat in the opposite direction, often moving back to the point at which it started an hour or so before.

EUR/USD 15 min. chart

EUR/USD 15 min. chart

Why does this happen?  Well, I believe it’s the movers and shakers of the forex market (the bigger institutions) faking a big move, to suck in all the little guys who don’t know any better.  Now, for all you traders who have read all the “why forex is so great” blogs / e-books etc. stating how the market is so liquid and can’t possibly be moved by any particular player – I have news for you! But, I’ll leave that for another blog entry in the next few days.

This type of trade doesn’t happen all the time, but it happens often enough to make money from it.  The idea is to wait for a break-out (20 to 30 pips above or below the high/low of the previous session), then get ready for price to reverse.  I got in a little late today (see chart above), but I still made an easy 20 pips or so.  You can set your stop quite tight and your target to near the break-out level for the best success.

Try it, backtest it, I think you’ll find it works pretty well on the GBP/USD or the EUR/USD (a little less volatile than the pound).

Good luck and trade seriously!

Different strokes for different folks

Well, actually I mean: use different trading systems and styles for different market conditions.

The last couple of weeks has seen some great trending markets in the major currency pairs, which has made for some excellent trading conditions when using a trend-following or momentum system.

This week we’re seeing (not surprisingly) a lot of consolidation going on as traders count their profits or cry over their losses and figure out what they’re going to do next.

GBP/USD over the last few weeks

GBP/USD over the last few weeks

So, it’s important that we apply the appropriate trading system to match the market conditions. Trying to use a trend-following system this week doesn’t meet with much success. You either end up getting stopped out a lot, or you just have to catch small profits when you can.

This week, we’re better off trying to use a forex trading system that works well in range-bound markets, or, stay out of the market altogether and wait and see which way the price is going to jump out of our consolidation triangle.

As successful trading is all about going with the highest probabilities, I’m going to try to keep catching trades in the direction of the previous trend (example: selling the pound or euro against the dollar) by catching bounces off the upper trend line. I’ll keep my stops tight and my targets conservative until we hopefully see the price continue in the direction of the trend in a few days time.

Good luck and trade seriously!

3 reasons why you MUST keep a journal to win at forex trading

One of the important features built into the Trade on Track system is a trading journal.

“So what?” you say? Well, it actually happens that this is a very rare feature in any trading software or trading tool – at least, to the degree that it’s implemented within the Trade on Track system.

There has been plenty written about the need for a trading journal, so I won’t repeat the text here, but I’ve included a couple of links at least :

Keeping a journal is a big step toward success in the forex trading business, don’t skip it!!!

3 reasons why it is necessary? Read on …

  1. It forces you (in a self-checking kind of way) to adhere to your trading plan and your trading systems. You don’t like lying, even to yourself, so if you have a routine in place where you record the details of every trade, why you took it, what mistakes you made, what successes you had – then it’s a self-enforcing way of keeping your trading on track.
  2. You can go back and analyze your trading journal at a later date. Yep, it’s easy to see bad trades in hindsight, but actually going back and reading WHY you took a particular trade can help in determining if it was a you problem (IE. you took the trade when you shouldn’t have), or just a trading inconsistency. Reviewing your trades, both the good ones and bad ones, and learning from what you did right and wrong, can make a phenomenal difference to your trading style and performance in future. Trade on Track goes a lot further than just letting you look at your journal entries, it provides statistics, charts, comparisons and summaries of your trading history to help you learn and move forward in leaps and bounds.
  3. A trading journal helps you to identify and refine the trading strategies that are winners, and to help avoid the strategies (or lack of them) which cause you losses. Once again, by reviewing and analyzing your trading style and trading history on a regular basis, you can see what works and what doesn’t. You may be surprised at what you dig up!

Keeping a trading journal while trading the forex can be a real pain. But, as it’s a critical component in the professional trader’s arsenal – we found a way to make keeping a journal a simple process and we’ve built it into the Trade on Track software tool. Be sure to check it out!

Good luck and trade seriously!