The fact that the economic calendar is always at hand, the credibility of fundamental analysis, in the absence of the desire to study it deeply, make trading on the news very relevant. In the previous article, we examined several possible options for the asset’s behavior in anticipation of the release of important macro statistics, the announcement of the results of central bank meetings or statements by officials. Let me remind you that it was a matter of consolidation, purchase (sales) of assets on the rumors and, finally, releases that were accompanied by unexpected news. We immediately discard the last case: force majeure on Forex happens, and in order not to fall into the position of a person who is powerlessly watching how his deposit melts, it is necessary to place stop orders.
In early July, the AUD / USD pair was actively sold, hoping for a decrease in the RBA’s main interest rate. The reserve bank did it, but the Ozzy reaction was not at all what it is commonly believed: after a short-term decline, it rose sharply. It was about implementing the principle of “sell by rumor, buy by the fact”. As soon as the central bank announced its decision, the bears began to curtail their positions. The downward movement was due to the desire of unprepared traders to win back the news, although in fact it was already won back. In order to verify this, it was necessary to look at the left side of the graph.
The best solution in situations when an asset falls (grows) on the eve of an important event is to enter a position opposite to the initial market movement from the level of the beginning of this movement. In the case of the “Australian”, quotes return to the opening of the bar allowed to form along. A protective stop order should be placed at a minimum of fluctuations, take profit is determined using harmonious trading patterns.
If the central bank gives the market more than the latter wants, then the movement of the asset until an important event can continue after it in the same direction. For example, in early June, the EUR / USD pair was actively growing on expectations that Mario Draghi would not signal a weakening monetary policy. In fact, the ECB even raised forecasts for inflation and GDP, while its head spoke about the strength of the labor market and domestic demand. As a result, after a slight decline in the euro, it confidently moved north. As in the case of the Australian dollar, the return of EUR / USD quotes the opening of the bar became the basis for purchases.
It was possible to form a position a little earlier or a little later, based on the ” Deception-ejection ” pattern. A trader familiar with this model should have paid attention to short-term consolidation, a false breakdown of its lower border and the pair’s return to the middle, and then to the upper border of the trading range. It is there, in accordance with the theory, that there are entry points to the long.
If an asset on the eve of an important event does not grow (does not fall), but consolidates, then the trader should place two pending orders: to buy near the upper border of the trading range and to sell near the lower. Protective stop orders are set at the extremes of the previous swing, the potential profit is determined based on the targets of harmonious trading patterns. So it was in the case of Jerome Powell’s July speech to the US Congress when the Fed chairman hinted at a cut in the federal funds rate.
Thus, the news gives us excellent opportunities to make money, the main thing is to know how to build a trading strategy.