When I first heard about news trading, I thought it was an impossible game. Everyone told me that trading during major economic news events was too risky—that it could blow up your account faster than you could say “stop-loss.” But deep down, I was intrigued. I wanted to know if there was a way to turn that volatility into consistent profits.
Spoiler alert: there is. It’s called the Straddle News Strategy, and it completely changed how I approach forex trading. Today, I’ll walk you through the step-by-step process I use to trade the news confidently, even during the most volatile moments.
If you’ve ever wanted to make the
most of rapid market movements but didn’t know where to start, this guide is
for you.
What is News Trading & Why Does It Matter?
News trading is a style of trading
where you base your decisions on the release of economic news and its impact on
the market. These events often cause massive price swings in a matter of
seconds.
Why Trade the News?
- High Volatility: News events cause big price
movements, offering opportunities for quick profits.
- Predictable Timing: You know exactly when
news will be released, so you can plan ahead.
- Opportunities in Both Directions: With the
right strategy, you can profit regardless of whether the market goes up or
down.
The Risks of News Trading
- Extreme Volatility: Prices can move
unpredictably, triggering stop-losses.
- Slippage: Orders may not execute at the
expected price during rapid movements.
- Emotionally Intense: The fast pace can lead
to impulsive decisions.
Despite these challenges, I’ve
found that with the right preparation and strategy, news trading can be
incredibly rewarding.
The Tools You Need for News
Trading
Before you dive into news trading,
it’s essential to set up your trading toolkit. Here’s what I use:
1. MT5 Trading Platform
- Why MT5? It’s more advanced than MT4, with
better tools for managing orders during fast-paced trading.
- Key Features: Drag-and-drop stop-loss
adjustments, multi-currency support, and customizable charts.
2. A Reliable Broker with Low Spreads
- Why It Matters: During news events, spreads
can widen significantly. A broker with low spreads ensures you don’t
overpay.
- My Choice: IC Markets, which offers ECN
accounts with spreads as low as zero pips.
3. Economic News Calendars
- Use platforms like Investing.com or Forex
Factory to track upcoming news events.
- Filter for high-impact news to focus on
events that will move the market.
4. Time
- Why? Timing is everything in news trading.
Time.is shows accurate time down to the millisecond, helping you place
trades precisely.
5. Position Size Calculator
- Use tools like the Hot Forex Position Size
Calculator to calculate the right lot size for your account balance.
|
Tool |
Purpose |
|
MT5 |
Trading platform for placing and
managing trades. |
|
IC Markets |
Broker with low spreads for
cost-effective trading. |
|
Investing.com |
News calendar to track
high-impact events. |
|
Time.is |
Accurate timing for news
releases. |
|
Position Size Calculator |
Calculates the optimal lot size
based on your balance. |
The Straddle News Strategy - A Step-by-Step Guide
The Straddle News Strategy
is my go-to method for news trading. It’s simple, effective, and works in both
bullish and bearish markets.
What is the Straddle Strategy?
The strategy involves placing two
pending orders:
- A Buy Stop above the current price.
- A Sell Stop below the current price.
When the news is released, one of
these orders will trigger, capturing the price movement regardless of
direction.
Step 1: Choose the Right News Event
Not all news events are worth
trading. Focus on high-impact news that consistently moves the market.
Major News Events to Watch
- US Dollar (USD):
- Non-Farm Payroll (NFP)
- Unemployment Rate
- Canadian Dollar (CAD):
- GDP
- Employment Change
- Australian Dollar (AUD):
- Retail Sales
- Interest Rate Decisions
|
Currency |
High-Impact News |
|
USD |
NFP, Unemployment Rate |
|
CAD |
GDP, Employment Change |
|
AUD |
Retail Sales, Interest Rate
Decisions |
Step 2: Set Up Pending Orders
- Determine Your Pair: Choose a currency pair
affected by the news.
- Example: For Canadian Employment Change, trade
USD/CAD.
- Place Two Orders:
- Buy Stop: Set it 20 pips above the current
price.
- Sell Stop: Set it 20 pips below the current
price.
- Set Stop-Loss and Take-Profit:
- Stop-Loss: 10 pips.
- Take-Profit: 50 pips or based on historical
price movements.
Example:
- News Event: Canadian Employment Change
- Pair: USD/CAD
- Buy Stop: 20 pips above current price.
- Sell Stop: 20 pips below current price.
Step 3: Monitor the Trade
When the news is released:
- One of your pending orders will trigger.
- Cancel the other order immediately to avoid
unnecessary risk.
- Let the trade run until it hits the stop-loss or
take-profit.
Common Challenges & How to Overcome Them
1. Slippage
- Problem: Orders execute at a different price
due to volatility.
- Solution: Use a broker with fast execution
speeds and minimal slippage.
2. False Breakouts
- Problem: Price moves slightly in one
direction before reversing.
- Solution: Set stop-losses to minimize losses
from fake moves.
3. Conflicting News
- Problem: Overlapping news events create
unpredictable price movements.
- Solution: Avoid trading pairs affected by
multiple news events simultaneously.
Why the Straddle Strategy Works?
- Captures Volatility: Profits from sharp
price movements in either direction.
- Minimizes Risk: Tight stop-losses limit
potential losses.
- Simple and Effective: Easy to set up and
execute, even for beginners.
Real-Life Example - My $500 USD/CAD Trade
Let me share one of my successful
trades using the Straddle News Strategy:
- Setup:
- News Event: Canadian Employment Change.
- Pair: USD/CAD.
- Buy Stop: 1.2500.
- Sell Stop: 1.2480.
- Outcome:
- News caused a sharp upward movement.
- Buy Stop triggered at 1.2500, and I closed the
trade at 1.2550, netting 50 pips.
|
Details |
Outcome |
|
Initial Balance |
$1,000 |
|
Lot Size |
1 |
|
Profit |
$500 |
Tips for Success with News Trading
- Prepare in Advance: Set up your orders 10-15
minutes before the news release.
- Practice on a Demo Account: Test the
strategy risk-free before using real money.
- Stay Disciplined: Stick to your stop-loss
and take-profit levels.
- Keep a Journal: Record your trades to
analyze and improve over time.
Finally, Is News Trading Really Worth It?
For me, news trading isn’t just a
way to make money—it’s a way to challenge myself & grow as a trader. The
Straddle News Strategy has given me a simple, repeatable method for turning
high volatility into consistent profits.
If you’ve ever felt intimidated by
news trading, I encourage you to give it a try. Start small, stay disciplined,
and use the tools and strategies outlined here. With practice, you’ll discover
just how powerful news trading can be.