Do You Trade The News?

At takethepips, news are not traded but we will take note of NFP release since it is usually very volatile. Sometimes, before the release of NFP, we will reduce our positions or completely close off all positions. In general, we feel that it is hard to predict NFP figures and hard to catch price action within first 5 minutes of the release. Even if you are able to catch price action during the first 5 minutes, if you look closely at the spreads during NFP release, you may see that spreads for EURUSD can be as high as 30 pips for some brokers. Of course, there are traders who specialize in trading news events but for us, we feel that it is not our forte and we wan to stick with what we are good in.

There are other reasons why it is hard to trade news. At times, we have surprise news which shock the market and nobody is able to anticipate. For a news trader, how would you catch something happening instantaneously but you have no access to much information to begin with. At times, you expect good data to be coming out and you are right with your prediction but price moves in the opposite direction instead, how would you react in such instances? This could be due to the fact that market has priced in good economic release and price has moved significantly prior to the release but market is expecting way better economic release, hence you may observe that price moves the other way.

Even with a Bloomberg terminal which gives you access to market news at an instant, it is still hard to catch price movement at that instance. In addition to that, you need to spend a lot of energy to be in front of your Bloomberg terminal and computer screen.