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Trading breakouts on the news
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Trading breakouts on the news

  #1 (permalink)
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Trading breakouts on the news

Hi guys,

I just want to post a chart of the FDAX which shows how the instrument reacted after todays 8.30 EST news came out. It is a chart with 10 seconds per bar. The first huge candle moves up for about 70 tick (35 points) candle (one tick is €12.50).
If you buy on the low and sell on the high you would have made about €900 in 10 seconds on one contract.
If you or your system wasnt fast enough, u may have been filled somewhere at the top and 10 seconds later you may find yourself 180 ticks behind; this was the way the FDAX took within the 2nd 10 seconds candle after the news. So for me this means that trading the news is not quite risk free which one should keep in mind ..

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  #2 (permalink)
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What is your stop? Where exactly are you setting the bracket orders?

This is easy enough to backtest, and I believe you will see it is not a profitable long term solution, especially after factoring in you need a very expensive colocated server in order to have a chance on the fills without major slippage.

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  #3 (permalink)
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Big Mike View Post
What is your stop? Where exactly are you setting the bracket orders?

This is easy enough to backtest, and I believe you will see it is not a profitable long term solution, especially after factoring in you need a very expensive colocated server in order to have a chance on the fills without major slippage.

Mike

I think slippage is the key problem here, as many stop orders are being executed at the same time. The stop orders create a temporary imbalance, as there are

-> more sell stops below the trading range (either protective sell stops or sell stops to enter a new short position) than buy stops
-> more buy stops above the trading range (either protective buy stops or buy stops to enter a new long position) than sell stops

I do not agree that it is easy to backtest this setup. It is near-impossible to build a model to estimate the slippage that will result, and without being able to estimate slippage, the results of any backtest will be false.

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  #4 (permalink)
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I meant to backtest the general principal of bracket orders around news, not even factoring in the huge slippage.

Mike

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  #5 (permalink)
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I do not trade the news, so i was not in this trade. I just found it as remarkable, as I seldom saw such a spike. by the way, I am not a conspiracy guy, but do you think it is possible to mark up e.g. the FDAX like in this example for 15 ticks and then let it run free? I mean, do you think that it would be possible for someone to calculate "in a fraction of a second" which orders are in the market and what he would have to do to mark up the price now + 15 ticks in a second? In this second new orders may come in of course, so, do you think it is poosible to arrvie "price now + 15 ticks" in a second with a good likelyhood?
In this content, what I would like to understand: does anyone see all the orders in the market for e.g. +/- 20 ticks buy/sell around the last price? As you know, I see the price and the next 5 buy orders down and sell orders up.


Big Mike View Post
I meant to backtest the general principal of bracket orders around news, not even factoring in the huge slippage.

Mike


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  #6 (permalink)
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PowerM View Post
... does anyone see all the orders in the market for e.g. +/- 20 ticks buy/sell around the last price?

Yes. Brokers.

They can (theoretically) see all the pending orders of their clients (to any depth).
Of course they would never use this knowledge .

If they have a sufficient number of clients they can (theoretically) make statistically valid assumptions about the whole of the market.

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