Select economic reports and speeches from top officials dramatically impact currency prices, and Robert Christy discusses how to trade the news while adding in technicals for more efficiency.
Many short-term traders are technically driven; they watch those charts very closely, but what about trading on news and news-driven events?
Here is Robert Christy to talk about how he does that. So Robert, when you talk about news-driven trading, what do you mean there?
Basically with news-driven events, what I want to trade are the actual releases. You know, we have CPI, PPI, we have the Bernanke events whenever he comes out to give out the FOMC notes. We want to be able to trade those.
We also trade President Obama’s speeches. A lot of time when he talks, the dollar goes down in value over a real short-term time frame. So we actually want to try to play that a little bit if we can. We check out WhiteHouse.gov to see when he’s going to speak.
He travels a lot, and so there’s always a speech that he’s going to give where he may say something that is kind of out of sync or something like that.
Vice President Biden, we also check his Web site to see if he’s going to be giving any talks.
We check the major news tickers to see if anybody has a release. The currencies trade 24 hours a day, and we have releases from all over the world. We have them in Australia, Japan, Germany, Great Britain, and then back here in the United States, so whenever there’s an event, we want to be in a position to trade that.
We start with the consensus estimate, and when the actual announcement comes, it’s either good or bad. The market will move based on that.
Do you want to try to get in before these things happen to play the move, or is that too difficult to really decide which way they’re going to go?
On the major economic events, I like to get in about a half hour prior, because as you get closer to the announcement itself, it kind of takes on a life of its own and gets a little bit erratic. Outside of the noise level, 20 to 30 minutes prior is usually a good time to enter the trade.
So Robert, what about something where it reacts against what you thought it was going to? Maybe it reacts for a while and then turns around after an announcement. How should you handle that and protect yourself there?
Well, there’s really a couple of ways. Whenever I enter the trade, 30 minutes prior, what I want to do is I have at least one or two limit areas, which is my profit area where I want to get out. I also have a stop area.
If it goes one way or the other, let’s say I want to be long something and then the price drops and drops through the stop, what I have is a nuclear option below that actually changes the direction of the trade.
So if we get a complete and total surprise—kind of like what happened when we had the Bernanke announcement about Operation Twist, which was a little bit of a surprise because of the magnitude—we got stopped out at a loss rather quickly, but then turned it around and let the trade run in the opposite direction. We actually turned out with a pretty good profit.
On news-driven trading, should you also be looking at the charts to see the support levels and resistance levels that you need to be aware of?
We do that ahead of time because it helps us determine our profit areas as well as our stop/loss areas in advance.
And how do you do that? What kind of things on a chart are you looking at?
Really just across-the-board support and resistance. You can use really any type of chart you want.
What time frame do you typically like to use?
For the shorter-term trades, I use the ten-minute chart.
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