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Trading inventory reports?

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Trading inventory reports?

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  #1 (permalink)
Kirkland, WA/United States
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Vision/Rithmic
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LightWeight's Avatar
Posts: 138 since Jul 2012
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Hello all,

I'm curious what the consensus or insight here is about trading scheduled news reports. What I mean by that is trading the reaction of standard news reports, not the fundamentals of what the reports say. EIA inventory reports on Wednesday morning, FOMC reports, ECB reports, USDA reports, etc. I've been observing the EIA reports every week, and it seems like it's entirely feasible to trade the reaction. I mean right on the dot at 10:30 AM the market takes off one way or the other, and it's usually over within a minute, and often returns back down to the previous trading range. Wouldn't it be pretty easy to hop on the rocket and scalp part of the momentum? I've been doing it in sim and it's quite profitable, the only thing I don't know is how bad your fills would be using a limit or buy bid/sell ask order, instead of a market order. Same thing when you cover, are market orders your only option or do bid/ask orders still work?

And just a week or so ago when we had the FOMC release on Wednesday afternoon and then the ECB report the next morning, both times you had the same thing, a quick and hard reaction in oil. Then again on Friday when the payroll numbers came out 100k higher than expected. And finally today the USDA report came out and moved corn up over 10 cents and soybeans over 20 cents in that first minute, before both reversed and came right back down to the trending range.

So I guess my point is, does anyone here trade these reports, or is there something about doing it in real time that I'm missing? I mean if trading the trend is always the best option, this is nothing more than a super fast and super condensed trend, right? Stay flat the market before the report, once you see the price action move then buy or sell, and then cover when the momentum stalls out -- should be pretty easy, right? Then stay flat until the market sorts itself out again, which seems to take 5-15 minutes.

I'm also curious if anyone is aware of other reports that tend to do this in currencies, softs, indices, etc.

As a side note, I also find it amusing how late the news is. I have CNBC running during the EIA report, and by the time the reporter gets on camera all excited about the bull run or short selling action, the move is already over. It's only after the move happens that I go and read the news to find out why it did what it did. I honestly don't know how the big guys who are moving the market like that can translate the news THAT FAST. I mean within seconds of the release the price is moving, it's crazy.

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  #3 (permalink)
Kirkland, WA/United States
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Vision/Rithmic
Trading: Futures
LightWeight's Avatar
Posts: 138 since Jul 2012
Thanks: 138 given, 42 received

This is a picture of the soybean price move by the way on a 1 minute chart. Are you telling me nobody here traded this?

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  #4 (permalink)
Charlottetown, Prince Edward Island
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I'm a technical trader, and I don't have a Scoobie Doo about fundamentals; seems like a massive head game to me. Every time someone tries to tell me the reason the market moved I get bored, who knows... who cares, everyone will have a different opinion. At the end of the day the market moved because there was more volume initiating on one side or the other than responsive volume on the other side. Does this mean I ignore reports? Not exactly, I don't care about the content but I know that traders do and participation decreases just ahead of the release and, sometimes, there is a flurry of activity after... so if I have a position on, in profit, ahead of the release, and a technical reason to believe it will continue to move in my favour I'll just leave my position, target and stop in place. I typically won't establish new positions just ahead of the number. I'm only really interested in Inventories (I trade Cl exclusively), FOMC, and non farm payrolls... Oh and 11:30 CST (London Close) daily.

Just my two pence.

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