Broker to Trading

News trading is trading on the release of news, typically economic data of some kind which has in the past resulted in sharp sudden alterations in value, deviating from normal market expectations by the distance travelled and the time frames, which can be very short. Part of the reason the time frame is short is because the surges in liquidity result in unusual market activity, but the market can quickly reassert itself and digests the changes caused by the news event. This said volatility can be seen for an extended time after an important news move and can result in the reflections of the move in later trading sessions.

A 1 minute news trading strategy is predicated exactly on those news trades where the market reacts sharply producing an unusually extended move. This may not happen no matter what the conditions. However if there has been a generally accepted prediction of the data in question (seen for example on an economic calendar) and the data different sharply from this, particularly if it is also opposite in terms of expected gains vs losses and if it is data which moves a Forex pair, then there may be a sharp rapid reaction from news traders and computer programs, resulting in a strong directional move which may continue, may oscillate or may stall, but all within potentially 1 minute (or so).

In a way the trader does not have to concern themselves with the outcome, unless they have reason to believe the predictions are incorrect. What can be done is to take a position before the release, but not too far from it, trying to find the quiet time just before release. If the position is not then taken out by wild swings in the marker prior to release the position will either be on the right or wrong side of the release. News trading is complicated by oscillations which in general could be seen as a likely potential outcome and are hard to trade. For example the market moves sharply then reverses back down in a very short time frame. Setting targets in news trading is problematic as it can move in complex ways quickly. A news trade can go right quickly, though and if this happens, then an exit point is needed.

In the all ducks in a row trade where the market moves sharply, stalls (which is probably will no matter what) and then continues in the traded direction in a more (relatively) sedate manner, it is possible to stay with the trade and even turn it into a longer term trade, which is a potential goal for all short term trades. However the potential for such a trade to move in the opposite direction remains. It might be speculated that such trades happen when the news is such as to change the market and its expectations of the potential for value in a given Forex pair, particularly Forex pairs directly affected by the news. The pair makes and is given room to have unprecedented range, compared with normal market conditions, extended even in time.