The majority of this sub is focused on technical analysis. I regularly ridicule such "tea leaf readers" and advocate for trading based on fundamentals and economic news instead, so I figured I should take the time to write up something on how exactly you can trade economic news releases.
This post is long as balls so I won't be upset if you get bored and go back to your drooping dick patterns or whatever.
How economic news is released
First, it helps to know how economic news is compiled and released. Let's take Initial Jobless Claims, the number of initial claims for unemployment benefits around the United States from Sunday through Saturday. Initial
in this context means the first claim for benefits made by an individual during a particular stretch of unemployment. The Initial Jobless Claims figure appears in the Department of Labor's Unemployment Insurance Weekly Claims Report, which compiles information from all of the per-state departments that report to the DOL during the week. A typical number is between 100k and 250k and it can vary quite significantly week-to-week.
The Unemployment Insurance Weekly Claims Report contains data that lags 5 days behind. For example, the Report issued on Thursday March 26th 2020 contained data about the week ending on Saturday March 21st 2020.
In the days leading up to the Report, financial companies will survey economists and run complicated mathematical models to forecast the upcoming Initial Jobless Claims figure. The results of surveyed experts is called the "consensus"; specific companies, experts, and websites will also provide their own forecasts. Different companies will release different consensuses. Usually they are pretty close (within 2-3k), but for last week's record-high Initial Jobless Claims the reported consensuses varied by up to 1M! In other words, there was essentially no
The Unemployment Insurance Weekly Claims Report is released each Thursday morning at exactly 8:30 AM ET. (On Thanksgiving the Report is released on Wednesday instead.) Media representatives gather at the Frances Perkins Building in Washington DC and are admitted to the "lockup" at 8:00 AM ET. In order to be admitted to the lockup you have to be a credentialed member of a media organization that has signed the DOL lockup agreement. The lockup room is small so there is a limited number of spots.
No phones are allowed. Reporters bring their laptops and connect to a local network; there is a master switch on the wall that prevents/enables Internet connectivity on this network. Once the doors are closed the Unemployment Insurance Weekly Claims Report is distributed, with a heading that announces it is "embargoed" (not to be released) prior to 8:30 AM. Reporters type up their analyses of the report, including extracting key figures like Initial Jobless Claims. They load their write-ups into their companies' software, which prepares to send it out as soon as Internet is enabled. At 8:30 AM the DOL representative in the room flips the wall switch and all of the laptops are connected to the Internet, releasing their write-ups to their companies and on to their companies' partners.
Many of those media companies have externally accessible APIs for distributing news. Media aggregators and squawk services (like RanSquawk and TradeTheNews) subscribe to all of these different APIs and then redistribute the key economic figures from the Report to their own subscribers within one second after Internet is enabled in the DOL lockup.
Some squawk services are text-based while others are audio-based. FinancialJuice.com
provides a free
audio squawk service; internally they have a paid subscription to a professional squawk service and they simply read out the latest headlines to their own listeners, subsidized by ads on the site. I've been using it for 4 months now and have been pretty happy. It usually lags behind the official release times by 1-2 seconds and occasionally they verbally flub the numbers or stutter and have to repeat, but you can't beat the price! Important
- I’m not affiliated with FinancialJuice and I’m not advocating that you use them over any other squawk. If you use them and they misspeak a number and you lose all your money don’t blame me. If anybody has any other free alternatives please share them!
How the news affects forex markets
Institutional forex traders subscribe to these squawk services and use custom software to consume the emerging data programmatically and then automatically initiate trades based on the perceived change to the fundamentals that the figures represent.
It's important to note that every institution will have "priced in" their own forecasted figures well in advance of an actual news release. Forecasts and consensuses all come out at different times in the days leading up to a news release, so by the time the news drops everybody is really only looking for an unexpected
result. You can't really know what any given institution expects the value to be, but unless someone has inside information you can pretty much assume that the market has collectively priced in the experts' consensus. When the news comes out, institutions will trade based on the difference between the actual and their forecast.
Sometimes the news reflects a real change to the fundamentals with an economic effect that will change the demand for a currency, like an interest rate decision. However, in the case of the Initial Jobless Claims figure, which is a backwards-looking metric, trading is really just self-fulfilling speculation that market participants will buy dollars when unemployment is low and sell dollars when unemployment is high. Generally speaking, news that reflects a real economic shift has a bigger effect than news that only matters to speculators.
Massive and extremely fast news-based trades happen within tenths of a second on the ECNs on which institutional traders are participants. Over the next few seconds the resulting price changes trickle down to retail traders. Some economic news, like Non Farm Payroll Employment, has an effect that can last minutes to hours as "slow money" follows behind on the trend created by the "fast money". Other news, like Initial Jobless Claims, has a short impact that trails off within a couple minutes and is subsequently dwarfed by the usual pseudorandom movements in the market.
The bigger the difference between actual and consensus, the bigger the effect on any given currency pair. Since economic news releases generally relate to a single currency, the biggest and most easily predicted effects are seen on pairs where one currency is directly effected and the other is not affected at all. Personally I trade USD/JPY because the time difference between the US and Japan ensures that no news will be coming out of Japan at the same time that economic news is being released in the US.
Before deciding to trade any particular news release you should measure the historical correlation between the release (specifically, the difference between actual and consensus) and the resulting short-term change in the currency pair. Historical data for various news releases (along with historical consensus data) is readily available. You can pay to get it exported into Excel or whatever, or you can scroll through it for free on websites like TradingEconomics.com
Let's look at two examples: Initial Jobless Claims and Non Farm Payroll Employment (NFP). I collected historical consensuses and actuals for these releases from January 2018 through the present, measured the "surprise" difference for each, and then correlated that to short-term changes in USD/JPY at the time of release using 5 second candles.
I omitted any releases that occurred simultaneously as another
major release. For example, occasionally the monthly Initial Jobless Claims comes out at the exact same time as the monthly Balance of Trade figure, which is a more significant economic indicator and can be expected to dwarf the effect of the Unemployment Insurance Weekly Claims Report. USD/JPY correlation with Initial Jobless Claims (2018 - present) USD/JPY correlation with Non Farm Payrolls (2018 - present)
The horizontal axes on these charts is the duration (in seconds) after the news release over which correlation was calculated. The vertical axis is the Pearson correlation coefficient: +1 means that the change in USD/JPY over that duration was perfectly linearly correlated to the "surprise" in the releases; -1 means that the change in USD/JPY was perfectly linearly correlated but in the opposite direction, and 0 means that there is no correlation at all.
For Initial Jobless Claims you can see that for the first 30 seconds USD/JPY is strongly negatively correlated with the difference between consensus and actual jobless claims. That is, fewer-than-forecast jobless claims (fewer newly unemployed people than expected) strengthens the dollar and greater-than-forecast jobless claims (more newly unemployed people than expected) weakens the dollar. Correlation then trails off and changes to a moderate/weak positive
correlation. I interpret this as algorithms "buying the dip" and vice versa, but I don't know for sure. From this chart it appears that you could profit by opening a trade for 15 seconds (duration with strongest correlation) that is long
USD/JPY when Initial Jobless Claims is lower than the consensus and short
USD/JPY when Initial Jobless Claims is higher than expected.
The chart for Non Farm Payroll looks very different. Correlation is positive (higher-than-expected payrolls strengthen the dollar and lower-than-expected payrolls weaken the dollar) and peaks at around 45 seconds, then slowly decreases as time goes on. This implies that price changes due to NFP are quite significant relative to background noise and "stick" even as normal fluctuations pick back up.
I wanted to show an example of what the USD/JPY S5 chart looks like when an "uncontested" (no other major simultaneously news release) Initial Jobless Claims and NFP drops, but unfortunately my broker's charts only go back a week. (I can pull historical data going back years through the API but to make it into a pretty chart would be a bit of work.) If anybody can get a 5-second chart of USD/JPY at March 19, 2020, UTC 12:30 and/or at February 7, 2020, UTC 13:30 let me know and I'll add it here.
So without too much effort we determined that (1) USD/JPY is strongly negatively correlated with the Initial Jobless Claims figure for the first 15 seconds after the release of the Unemployment Insurance Weekly Claims Report (when no other major news is being released) and also that (2) USD/JPY is strongly positively correlated with the Non Farms Payroll figure for the first 45 seconds after the release of the Employment Situation report.
Before you can assume you can profit off the news you have to backtest and consider three important parameters. Entry speed
: How quickly can you realistically enter the trade? The correlation performed above was measured from the exact moment the news was released, but realistically if you've got your finger on the trigger and your ear to the squawk it will take a few seconds to hit "Buy" or "Sell" and confirm. If 90% of the price move happens in the first second you're SOL. For back-testing purposes I assume a 5 second delay. In practice I use custom software that opens a trade with one click, and I can reliably enter a trade within 2-3 seconds after the news drops, using the FinancialJuice free squawk. Minimum surprise
: Should you trade every
release or can you do better by only trading those with a big enough "surprise" factor? Backtesting will tell you whether being more selective is better long-term or not. Hold time
: The optimal time to hold the trade is not necessarily the same as the time of maximum correlation. That's a good starting point but it's not necessarily the best number. Backtesting each possible hold time will let you find the best one. The spread
: When you're only holding a position open for 30 seconds, the spread will kill you. The correlations performed above used the midpoint price, but in reality you have to buy at the ask and sell at the bid. Brokers aren't stupid and the moment volume on the ECN jumps they will widen the spread for their retail customers. The only way to determine if the news-driven price movements reliably overcome the spread is to backtest. Stops
: Personally I don't use stops, neither take-profit nor stop-loss, since I'm automatically closing the trade after a fixed (and very short) amount of time. Additionally, brokers have a minimum stop distance; the profits from scalping the news are so slim that even the nearest stops they allow will generally not get triggered.
I backtested trading these two news releases (since 2018), using a 5 second entry delay, real historical spreads, and no stops, cycling through different "surprise" thresholds and hold times to find the combination that returns the highest net profit. It's important to maximize net
profit, not expected value per trade, so you don't over-optimize and reduce the total number of trades taken to one single profitable trade. If you want to get fancy you can set up a custom metric that combines number of trades, expected value, and drawdown into a single score to be maximized.
For the Initial Jobless Claims figure I found that the best combination is to hold trades open for 25 seconds (that is, open at 5 seconds elapsed and hold until 30 seconds elapsed) and only trade when the difference between consensus and actual is 7k or higher. That leads to 30 trades taken since 2018 and an expected return of... drumroll please
... -0.0093 yen per unit per trade
Yep, that's a loss of approx. $8.63 per lot.
Disappointing right? That's the spread and that's why you have to backtest. Even though the release of the Unemployment Insurance Weekly Claims Report has a strong correlation with movement in USD/JPY, it's simply not something that a retail trader can profit from.
Let's turn to the NFP. There I found that the best combination is to hold trades open for 75 seconds (that is, open at 5 seconds elapsed and hold until 80 seconds elapsed) and trade every single NFP (no minimum "surprise" threshold). That leads to 20 trades taken since 2018 and an expected return of... drumroll please
... +0.1306 yen per unit per trade
That's a profit of approx. $121.25 per lot. Not bad for 75 seconds of work! That's a +6% ROI at 50x leverage.
Make it real
If you want to do this for realsies, you need to run these numbers for all
of the major economic news releases. Markit Manufacturing PMI, Factory Orders MoM, Trade Balance, PPI MoM, Export and Import Prices, Michigan Consumer Sentiment, Retail Sales MoM, Industrial Production MoM, you get the idea. You keep a list of all of the releases you want to trade, when they are released, and the ideal hold time and "surprise" threshold. A few minutes before the prescribed release time you open up your broker's software, turn on your squawk, maybe jot a few notes about consensuses and model forecasts, and get your finger on the button. At the moment you hear the release you open the trade in the correct direction, hold it (without looking at the chart!) for the required amount of time, then close it and go on with your day.
Some benefits of trading this way: * Most major economic releases come out at either 8:30 AM ET or 10:00 AM ET, and then you're done for the day. * It's easily backtestable. You can look back at the numbers and see exactly
what to expect your return to be. * It's fun! Packing your trading into 30 seconds and knowing that institutions are moving billions of dollars around as fast as they can based on the exact same news you just read is thrilling. * You can wow your friends by saying things like "The St. Louis Fed had some interesting remarks on consumer spending in the latest Beige Book." * No crayons involved.
Some downsides: * It's tricky to be fast enough without writing custom software. Some broker software is very slow and requires multiple dialog boxes before a position is opened, which won't cut it. * The profits are very slim, you're not going to impress your instagram followers to join your expensive trade copying service with your 30-second twice-weekly trades. * Any friends you might wow with your boring-ass economic talking points are themselves the most boring people in the world.
I hope you enjoyed this long as fuck post and you give trading economic news a try!
Hey guys! I found a super cool list of everything a new forex trader would need to get started! Originally made by to nate1357
. Link to original thread http://redd.it/328cjr Free Resources Education: www.babypips.com/school www.informedtrades.com/f7 www.forex4noobs.com/forex-education www.en.tradimo.com/learn/forex-trading www.youtube.com/useTheTradeitsimple www.traderscalm.com www.orderflowtrading.com/LearnOrderFlow.aspx www.profitube.com Calendars: www.forexfactory.com/calendar.php www.dailyfx.com/calendar www.fxstreet.com/economic-calendar www.forexlive.com/EconomicCalendar www.myfxbook.com/forex-economic-calendar www.investing.com/economic-calendar Free News Websites: www.forexlive.com
- Daily live news, analysis and resources www.financemagnates.com
- FX industry news and updates www.fxstreet.com
- Daily news, analysis and resources www.forextell.com www.forexcup.com/news www.bloomberg.com/markets Forums: www.reddit.com/forex www.forums.babypips.com/ www.forexfactory.com/forum.php www.elitetrader.com/et/index.php www.forex-tsd.com/ www.fxgears.com/forum/index.php www.trade2win.com/boards Margin / pip / position size calculators www.myfxbook.com/forex-calculators
There are many factors to consider when choosing a brokerage. Regulations typically force US traders to only trade at US brokerages, while international traders have more choice. After considering location you need to consider how much capital you will start trading with as many have minimum deposit levels. Once you’ve narrowed that down you can compared spreads and execution. ECN brokers execute your orders straight through to their liquidity providers, while market maker brokers may pair up your trades with other clients. Market maker brokers typically will partially hedge your positions on the interbank market. Many consider this to be a conflict of interest and prefer to trade at an ECN broker who would have an active motive to see you succeed. Lastly, brokers run inherently risky business models so it is important to consider the risk of bankruptcy. www.forexpeacearmy.com
- Aggregates broker reviews. Be warned though that people only seem to make bad reviews. www.myfxbook.com/forex-broker-spreads
- Live comparison of executable spreads
United States & International-
- ECN. Used most by professional traders. Difficult platform for beginners
- Tight spreads
- Minimum deposit $10000 (or $3,000 if under 25yo) * Well diversified -Oanda
- Market maker. Second largest retail FX brokerage in the US. Easy platform for beginners.
- Fair spreads
- No minimum deposit
- Not well diversified, but well capitalized -Gain Capital (whitelabel forex.com) *Market Maker *Fair spreads *Minimum deposit $250 *Well diversified -FXCM Inc
- ECN. Largest retail FX brokerage in the US
- Tight spreads
- Minimum deposit $2000
- Not well diversified. CAUTION: FXCM nearly went bankrupt in Jan-2015 due to a lack of diversification and low capitalisation. As a result FXCM LLC was bailed out with a large loan which may prove difficult to pay back. Be warned that their business may not be sustainable in the long term. -MBTrading
- ECN. Mid-sized retail FX brokerage
- Fair spreads
- Minimum deposit $400
- Well diversified.
-LMAX (whitelabel DarwinEx)
*DMA broker based in the UK. Note that as a DMA broker LMAX eliminates the ability for LPs to last-look transactions. This may result in reduced liquidity during volatile times as liquidity providers would be likely not to risk posting liquidity to LMAX's pool. *Tight spreads *Minimum deposit $10,000 *Fairly well diversified
*ECN based in Switzerland, but available elsewhere depending on local regulations.
*Tight spreads *Minimum deposit $100 *Fairly well diversified
-IC Markets *ECN based in Australia *Fair spreads on standard account, tight spreads on professional accounts. *Minimum deposit $200 *Fairly well diversified
*ECN broker based in Australia. *Fair spreads on standard account, tight spreads on professional accounts. *Minimum deposit $200 *Not well diversified
Software / Apps:
- Apps are typically broker dependent. Some brokers have their own proprietary software, while others lease common software like Metatrader or NinjaTrader. Some software has a large development community for indicators and EAs.
- https://www.tradingview.com/ - Great for HTML5 browser based charting and alerts
- Common terms and acronyms
FAQ: I need to exchange money, how do I do it?
This isn’t what this sub is for. Your best bet is using your bank or an online exchange service. Be prepared to pay a hefty fee. I have money in one currency and need to exchange it into another sometime in the future, should I wait?
Don’t ask us this. We speculate intraday in FX and shouldn’t be relied on to tell you what’s best for you. Exchange the money when you need it. I have an FX account, should I start trading demo or live?
This is highly debatable. You should definitely demo trade until you have mastered how to use the trading platform on desktop and mobile. After that it’s up to you. Many think that the psychology of trading live vs demo trading is massively different. So it may pay to learn to trade live. Just be warned that most FX traders lose almost their entire first account so start with a low affordable balance. What’s money management?
Money management is a form of risk management and is arguably the most important aspect of your trading when it comes to long term survival. You should always enter trades with a stop loss - the distance of the stop allows you to calculate how large of a percent of your account balance will be lost if your trade stops out. You can run a monte carlo simulation to figure out the risk of having a number of trades go against you in a row to drain your account. The general rule is that you should only risk losing 1-4% of your account per trade entered.
More on this here: www.investopedia.com/articles/forex/06/fxmoneymgmt.asp www.swing-trade-stocks.com/money-management.html What about automated trading?
Retail FX traders have been known to program “Expert Advisors” (EAs) to automate trading. It’s generally advisable to stay away from that until you’re very experienced. Never buy an EA from a developer because the vast majority of them are scams. What indicators are best?
That’s up to you to test and find out. Many in this forum dislike oscillating indicators since they fail to capture the essence of what moves price. With experience you will discover what works best for you. In my experience indicators that are most popular with professional traders are those that provide trading “levels” such as pivot points, fibonacci, moving averages, trendlines, etc. What timeframe should I trade?
Price action can vary in different timeframes. In longer term timeframes the price action and fundamentals are much more clear. Unfortunately it would take a very long time to figure out whether or not what you’re doing is successful on longer timeframes. In shorter timeframes you can often tell very quickly if what you’re doing is profitable. Unfortunately there’s a lot more “noise” on these levels which can prove deceptive for those trying to learn. Therefore the best bet is to use a multi-timeframe analysis, working from top-down to come up with trades. Should I trade using fundamental analysis (FA) of technical analysis (TA)?
This is a long standing argument in these forums and elsewhere. I’ll settle it here - you should have an understanding of both. Yes there are traders who blindly ignore one of the other but a truly well rounded trader should understand and implement both into the analysis. The market is driven in the longer term through FA. But TA is necessary to give traders a place to enter and exit trades from a psychological risk/reward standpoint. I’ve heard trading Binary Options is an easy way to make money?
The general advice is to stay away from binaries. The structure of binary options is so that when you lose the broker wins. This incentive has created a very scammy industry where there are few legitimate binary options brokers. In addition in order to be profitable in binaries you have to win 55-65% of the time. That’s a much higher premium over spot FX. Am I actually exchanging currencies?
Yes and no. Your broker handles spot FX is currency pairs. Although they make an exchange at the settlement date they treat your position in your account as a virtual currency pair. Think of it like a contract where you can only buy or sell it as a pair. In this sense you are always long one currency while short another. You are merely speculating that one currency will appreciate or depreciate vs another. Why didn't my order fill?
Even if price appears to cross over a line on your chart it does not guarantee a fill. Different charting platforms chart different prices - some chart the bid price, some the ask price and some the midpoint price. To fill a limit order price needs to cross your limit's price plus the spread at the time that it is crossing. If it does not equal or exceed the spread then it will not fill. Be wary that in general spreads are not fixed. So what may fill at one time may not at another.
Les Points et Figures sont un type de représentation graphique comme peuvent l'être les courbes, les bart charts ou bien encore les chandeliers japonais. La particularité de celle ci est qu'elle ne prend pas en compte la notion de temps mais uniquement la notion de prix. Broker Forex de référence ... Apprendre les figures chartistes Forex permet d'identifier les opportunités importantes en bourse. Mieux que des indicateurs techniques les figures constituent de vrais scénarios de trading ! Alors plus besoin de chercher un livre de figures chartistes, dans cet article, en plus de comprendre ce qu'est le chartisme, vous allez apprendre : La définition d'une ... Apprenez à repérer et analyse les principales figures graphiques, et à les utiliser pour pratiquer le trading forex intelligemment et repérer les retournements de tendances, les continuations de tendances, et les pauses dans les tendances. L’histoire des diagrammes en Points et Figures. Les Diagrammes en Points et Figures sont une représentation graphique des cours composés de croix X et de ronds O tracés en colonnes sur papier millimétré. Ils ne s’intéressent pas au temps qui passe mais uniquement aux cotations. Le principal objectif étant de focaliser l’attention de l’analyse uniquement sur le rapport de forces ... La technique des "Points et figures" est l'une des techniques les plus anciennes et les plus originales de détermination de signaux d`achat et/ou de vente. Sa représentation graphique est de loin la plus originale des représentations graphiques connues par tous analystes techniques, débutants ou experts. Les figures chartistes et patterns au Forex avec illustrations Précédemment, nous avons vu grâce à l'étude de quelques chandeliers japonais comment nous pouvions prévoir l'évolution des cours. Maintenant nous allons nous intéresser à de grandes figures constituées assez souvent par un nombre important de bougies. Le Forex et les CFDs sont des investissements spéculatifs très risqués. Il faut rester prudent est ne jamais misé de l’argent que vous ne seriez pas prêt à perdre dans sa totalité. Ce site n’est en aucun cas un site de conseils en trading, ce site ne fait que vous données des informations sur les différentes plateformes de trading ET CES ACTEURS. Merci de contacter un organisme de ...
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