Trading the news
How prices behave around releases, and the directional and non-directional approaches.
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Lessons
- 01How markets react to news.When a major economic figure is released, price can jump many pips in seconds. Liquidity providers quote less and wider, so the spread widens, and orders can fill at a worse price than requested, which is slippage. A stop loss closes the trade but cannot guarantee its price when the market gaps.
- 02Directional news trading.Directional news trading means taking a side, long or short, on what an economic release will do to a currency pair. You can trade before the number and guess the surprise, or after it and trade the move. Both face wide spreads, slippage and sudden reversals, so position size matters more than usual.
- 03Non-directional news trading.Non-directional news trading places a buy stop above the price and a sell stop below it just before a release, so whichever way the market breaks, one order catches the move. The catch is execution: around the release spreads widen and fills slip, and a whipsaw can trigger both orders, so costs can erase the expected gain.