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Big players use the lack of liquidity during news releases to move the market away from value very quickly in order to trap traders into losing trades and force other traders to chase if they want a piece of the move. Often the market will set up in such a way as to "tip its hand" prior to many news releases. If this is the case, entering prior to the news release is often the safest move (assuming you're trading a liquid market). That said, you have to have a reasonably good idea of what the market is trying to do to take a position prior to a news release - and many news releases do not occur in a context in which it is clear what the market is trying to do. These are the ones to avoid... but then, these are also the times you should be waiting for more information anyway.
just another view...
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
The problem with entering in around news is the danger factor. Swings can be so hard and violent risk getting stops jumped and getting massive slippage against you. For me it has nothing do with MA but risk management. Plenty of other trades out there without having to play with fire.
"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
Playing the news for guys like us is a guessing game. The big players who do play the news, generally know the news way before we do. We are then at the mercy of how they want to move the market. If you are wrong, you run the high risk of being more wrong then you planned for, when your stop loss is leapfrogged and you get your stop filled 50 ticks worst then where you placed it, because of the radical volatility. I understand that some Forex brokers even delay filling stop orders during fast moving news driven events.
i stop trading and close any position 5 mins prior to any news release that might affect my instrument. I usually stay out until at least 2-3 mins after the news as well. I find that most of the time, price continues doing whatever it was doing prior to the news within a few minutes anyway.
The exception is those times when price is driven far away from value, then I usually have to wait quite a long time before anything worthwhile is available for trading.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
I've not seen this before but its probably the best explanation I've seen. Excellent article on a simple method. I've book marked it for future reference. It's exactly what I try to do. There are some nuances I think I will benefit from.
Thank you Cory.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
Hmmm. Is there any legal trade that is not a guessing game? If anybody could prove that a "big player" knew the news and traded based on this knowledge prior to a news release, they would get busted - I hope that's common knowledge. We all know that strong markets can shrug off bad news and weak ones can drop on good news. The news is just another piece of the game. If someone can use a news release to further their plans, they will - including the knowledge that many will avoid trading them so the lack of liquidity can make the trade more profitable. again... just another view (my last on this topic b/c I don't want to derail Pdub's thread...)
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
i took a peak at this method, and i agree , this is very similar(as far as i can tell) to what Panda is doing.I think, at the end of the day, the moving avgs that an individual uses, could vary.The trader that stays with what he/she has for a while, will start to see the patterns.The hardest part though, is waiting and identifying those trends , that have the nicely behaving pullbacks.It seems to me, the market spends more time in transition/chop, and trend reversal.I did notice, in the floor trader method, that he said he took 11 trades in a whole week.That would indicate to me, that he was waiting for the correct scenario.That scenario, i think, is going to give the best win %...just some thoughts
RE the Floor Trader Method. I think the faster the chart, the more signals you will get. Also the larger the daily range is of your instrument, the more signals it produces. I am using a one minute chart on CL. This means I see enough signals most days to make 3-10 trades a morning. In any event, I limit myself to ten a day. Any more than that and I begin to fade. The waiting and the discipline to wait for 10 trades is enough for me on any one day.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
The floor trader method was marketed by a guy named Steve.
I bought it many many years ago; it was not explained very well and there are other traders on this board who also believe the product he was selling was not as clear as it should be.
I took this concept and applied it to a method that efuturevision website promotes and I now use it on very short-term volume charts and 12 hour charts in forex.
I personally believe the larger timeframes (equivalent to 2-7 minute charts) with higher timeframe confirmation is the most accurate way to trade and gives both a high win% and a good reward to risk when trading with the trend.
With regard to consolidation; if a market is 'boxing' or not taking out the most recent high or swing low and NOT making clear higher highs and higher lows (and vice versa) AND the m.a.'s (longer-term MA's) are not 'sloped' in the direction of the trade; wait 15 minutes (or less in crude); it will change.
Crude is by far the smoothest worldwide trading vehicle in the last several years; followed closely by TF/GC and/or 6E/FDAX.
Hard stops are critical though--these freight trains turn hard and fast and you simply have to be patient yet never hesitate for a moment when a setup happens, as the trades play out fairly fast (CL & FDAX).
Unless you can trade divergence with a better than .8reward to risk with a high win % (70%) I would advise all traders to develop ways to become more patient and NEVER break your written rules and trading plan. If you can do that your edge is there for the taking when the market is clearly trending and you can usually scoop up 2 to 3 winners in a row and be done for the market or the day or your daily goal.
