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How to Trade Following a News Release

By creating a solid trading strategy and embracing essential risk management, traders must learn how to handle turbulent markets while performing a trade. Effective trading techniques are provided in this article for investors wishing to trade after a news release.
  1. Trend-based approach

This strategy uses many periods and clearly defined degrees of support and opposition that are activated after a news release.

Traders might use this method when a clearly defined level of support or resistance is being approached but not quite reached by the current market price. Market movement might be pushed toward the trend line by the volatility after the news announcement. Traders might try to trade in the trend’s direction and on any possible rebound if the price stays inside the trend line.

The following four points are helpful for this kind of trade:

  • Find the trend’s direction on a daily chart.
  • Draw lines of support and resistance.
  • Choose a forex time range between 1 and 4 hours.
  • In an uptrend, buy near support, while in a downturn, sell near resistance.

Keeping this in mind, it is crucial to use tight stops while following this approach since news releases have the power to surpass established levels of support and resistance.

  1. Dual spike breakout approach 

This approach uses a five-minute chart to wait for market volatility to display a range before trading a break of that range. The US Non-Farm Payroll (NFP) announcement, which often has the most ability to affect the market, is included in this section for illustrative reasons.

Wait 15 minutes for three candles with a five-minute burn time to shut after the NFP release. Be sure to notice the highest and lowest prices of the two closed candles. After that, put an entry order to buy at the highest price and an entry order to sell at the lowest price. Targets and stops may be specified whenever an order is triggered at a distance twice the width of the high/low channel, respectively, for short trades and long trades.

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Volatility might cause the price to go above or below the short-term range, triggering an entry order and prompting a quick reversal to reach a stop loss. This is a drawback of this method.

In the following situations, this approach may be used:

  • To display 5-minute charts, alter the chart’s display options.
  • Consider the highs and lows of the first three candles.
  • Place entry orders when the price crosses the range’s upper or lower bound.
  • Set limits and stops.
  • Get rid of the unfulfilled order.
  1. Using a News Reversal Strategy

Immediately after a large news release, the market may move one way before reversing course and moving in the other direction.

The news reversal method targets a swift, persistent direction change after a significant initial price move and seeks to trade the news after the announcement.

Algorithms or the market may have sensed an overreaction in price, causing transactions to be placed in the other direction, which led to the reversal. The disadvantage of this approach is that the price keeps moving in the direction of the initial spike without experiencing any price reversals.

How to put the news reversal technique into practice:
  • Initial price increase: When news is announced that has the potential to affect the market significantly, prices often increase.
  • Watch for a reversal: Traders might wait 10–15 minutes for the reversal to return the price to where it was before the release.
  • Enter as soon as the price crosses pre-release levels or falls below them.
  • Target Levels: Trading professionals might think about creating numerous goal levels. Trades may be closed out on half of the positions as soon as one is triggered, and the remaining positions’ stops can be moved to break-even.
CONCLUSION FOR TRADING FOREX AFTER THE RELEASE

A more cautious method to approach news trading might be to trade the news after the announcement. This is because a trader has time to construct a technical setup for their trade once the emotions from the news announcement have subsided. Whatever trading strategy you choose for news trading, risk management, and using little to no leverage is essential to keeping money in your account to place the next transaction.

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