9/24 Analysis: How to Handle Open Trades With News Coming
How to Handle Open Trades With News Coming
3 minutes into the London session, we see this pattern emerge:
The CHF (turquoise line) is strong with huge current momentum to the upside (indicated by the steep line to the far right).
The AUD (orange line) is weak with huge current momentum to the downside (indicated by the steep line to the far right).
- AUD/CHF SELL
This is a trade I personally took today so from my entry, price pushed down 20 pips.
You may not have triggered your profit target considering the spread. Assuming you were still in the trade when news was to be announced, my trading rules state that I close out 5 minutes before that news release no matter what.
In this case, you only grab a profit of 11 pips compared to the normal 20 BUT, it keeps you from being whipsawed when the news is released and potentially taking a loss instead.
Watch the entire video analysis below:
[00:00 – 05:15]
[slide] [8 frenetically dancing currencies]
Hello, I’m James Edward from CompleteCurrencyTrader.com. Welcome to today’s Currency Strength Analysis training video where I have an example today of what you should do if you still have a trade open prior to a high-impact news release, which is exactly what happened during the London session earlier today.
So, this is what the indicator looked like at the start of the London session today. So, if you do your initial analysis you do have a few currencies which are looking quite promising. Down here, to the weak side, the most obvious one is the (orange) Australian Dollar (AUD) which, over the last 30 minutes, has been trending down and is continuing to do so, now, immediately, at the Open. And, on the strong side, you have the (red) British Pound (GBP) which is moving up, and, also, moving up to strength is the (pink) Euro (EUR) and the (blue) Swiss Franc (CHF).
Now, you could potentially put pending orders in the Market right now, a pending order 10 pips away from the Open price and wait for the Market to come to you. Or, alternatively, as I tend to re-emphasize on these videos, is, you wait a little bit and you hope to see the really perfect entries which is the very steep lines [generally points] right here, on the right-hand side, which is–
[slide] [2nd view: further right, same chart, blue / orange tip out]
(continues) … exactly what we got today. So, if I just fast forward the indicator through a little bit, you can see how, in the first couple of minutes, things started to develop up until this point, here. This is just three minutes after the Open. And what we have now, three minutes after London has come into play, is the perfect pattern that is, basically, a textbook example of what you should be looking for to trade on your entry of a break-out trade like this.
You have the (blue) Swiss Franc (CHF) that is moving up and is almost vertical (over here) on the right-hand side and the (orange) Australian Dollar (AUD) which has continued to move weaker and is now diverging completely the opposite to the (blue) Swiss Franc (CHF).
They are almost like mirror images to each other, if you look at the these two lines, back [points to blue at 1st lowest dive after 1st peak] from this point, here, and over on the right-hand side, which is the important side of the indicator, that is, again, moving very steeply down to weakness. So, between those two currencies, the (orange) Australian Dollar (AUD) and the (blue) Swiss Franc (CHF), you have the perfect, textbook example of the kind of momentum that you’re looking for to get you into a break-out trade right at the start of a new financial center opening.
So, that is the perfect entry. That is three minutes after–
[slide] [B&W vertical line AUDCHF.MS]
(continues) … London has opened and that corresponds to this [indicates 1st longest bar, ctr slide] price bar, here. (And this is actually a trade I took myself this morning, as well.)
So you can see how, from the Open, the price has pushed down, significantly more than what was happening beforehand, but there was already an established trend in the hour leading up to the London Open.
Now, when you’d have actually gotten into this trade, which is variable, depending on how quick you are at actually pulling the trigger. I entered around about here [low end same bar] and, the price [creates cross pt, diag line down 7 bars] down to the absolute lowest point has gone just over 20 pips.
There’s a possibility that you would’ve hit that 20-pip profit target and walked away with a full win, but I think it’s much more likely that you wouldn’t have and you would’ve entered quite low on this price bar and, because of the spread, as well, it’s very likely that you’d have just missed that profit target (which can be frustrating, but that’s just the way it goes). You have to account for that spread, as well.
So, we’ll assume that you were still in the trade. This [points 1st long bar past low] is when the high-impact news was scheduled on the (pink) Euro (EUR) and my trading rules always dictate that you should close any open trades five minutes–at least five minutes–prior to a high-impact news release on something like the (pink) Euro (EUR), which is one of the major currencies, because the volatility around news releases is usually very high, or can be very high and that is extremely risky to have an open position because you never know what’s going to happen. And, if the price whips [pointer up/down vertically] and soars back and forth and gets very volatile, your stops won’t be honest because there’s no liquidity in the Market and you could, actually, suffer much more significant losses than wherever your stop-loss was. So, my rule of my trading is always to close trades five minutes before.
So, that would’ve been on the close of this price bar [Open .67914, Close .67949] the Open of this price bar. That is where you would’ve manually closed the trade today, rather than waiting for a profit target to be hit. So, from [cross pt created ctr longest bar] there, if we assume you entered about the same point–place (sorry)–the same place that I entered, down to that [diag line to 2nd longest bar] second point where you would close manually, you’d have taken around about 11 pips profit. So, a little bit over half of what your normal 20-pip profit target is.
But that sometimes happens and that is a good example today to show you how to deal with this break-out strategy when you do have a high-impact news release scheduled and you happen to still be in an Open trade, because, in this example, today, you’ve just missed that 20-pip profit by probably less than a pip today. But, nevertheless, that means you would still be in trade and you wouldn’t want to get caught in this volatile pull back here and suffer a bigger loss than normal.
So, hopefully, that helps you deal with that kind of situation in the future.
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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