8/5 Analysis: Avoid the News
I want to show you how major news impacts the markets and your trading. I always suggest that you stay on the sidelines and not trade during these news events.
Today was the non-farm payroll report which may be the biggest news event each month.
If we fast forward just 15 minutes into the session, the indicator looks like this:
Now based on what we teach, you would think this is the perfect pattern. You have a strong EUR (pink line) with a very steep line indicating major momentum currently in the market and you see the same on the downside with the USD (blue line).
However, this spike is due to the news announcement. This is what the chart looks like:
In hindsight, this looks attractive as we see a 60 pip spike in price immediately when the news is announced.
The problem is there are a number of factors that make this a dangerous trading situation. In real time, there is no way you would be filled without slippage and worst case is you would be filled at or near the top of this price bar and then have it fall right after entry. In other words, you can’t control when you get in and when you get out and because of the extreme volatility that makes for an unknown situation.
Professional traders stay away from situations like this and choose to protect their capital so that they can live to trade another day.
You can watch the entire video analysis below:
You can see that our Currency Strength Indicator is an effective tool for picking out the highest probability, lowest risk trade set ups while avoiding market conditions that aren’t favorable. If you keep using this tool every day along with our daily Forex analysis, you will increase your win rate and be on your way to becoming a profitable trader long term.
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