Today I want to talk a little about trading strategy that quite a lot of day traders enjoy. It is economic news trading system. I know that no investor would consider using this kind of approach in trading for a lot of reasons, but a person who might be starting his/her career in trading it is useful to know about this trading method and possible profits as well as risks involved with it.
You probably know that all investors want to have a thorough understanding of a specific economy he is going to invest to. Fundamental news releases can convey it (in part) to investor. That’s why all traders follow what numbers are released each week from different countries and make decisions about possible areas of investing their capital.
The good news for day trader is that when the news is released it very often creates volatility in the financial markets which a trader can use to his advantage to make some nice cash. It is difficult to make money when markets are not moving anywhere. It is quite easy when they do.
The best part about this strategy is: even though a trader trades a fundamental event he does not necessarily have to know anything about fundamental analysis. One just has to know that a news release can create big moves and use this knowledge to place orders outside the most recent range (the most recent high and low) with an expectation that those would be triggered after the news is actually released.
One would naturally place a long order above the most recent high and a short order below the most recent low. The rest might be obvious for those who know what happens in the first fifteen minutes after a news release. Prices usually go wild and start moving upwards or downwards. One of the orders will be opened. And that order will start showing profit very fast. After a few minutes trader will have to close the second order which was not opened. Then you continue going forward with the market with the position that was opened as long as volatility is present. When it goes down you exit the game. Most often with nice profit.
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