Volatile economic announcement trades

December 19th, 2007 expert Posted in FOREX TRADING ENTRY STRATEGIES |

Economic announcements can produce some high volitile price breakouts (and Whipsaws). These are generally high risk times that many traders avoid and often close out their deals prior to the announcement. The Payroll trade on the 1st Friday of every month is a particular high volitile announcement.  It takes considerable trading competency and experience to trade high volitile economic announcement trades.

The following is a way trading these announcements:-

* Establish the exact time of the important announcement.
Confirmation of the importance of the announcement will be a narrow rangebound price movement (30 pips) with a bear or bull trap(false break) before the announcement.
* 2 minutes before the announcement input entry orders to straddle the current price (buy +15 to 20 pips / sell –10 to 15 pips).
* Wait for the break and cancel the unactivated leg of the straddle (or use it as a stop).
* Alternatively buy and sell market  orders could be activated 2 minutes before the time and stops moved within 15 to 20 pips from the price just before the announcement.

Many brokers systems can not cope with the fast movement of the price so make sure that your broker is comfortable with these tipe of trades.

More notes on straddle trades
* They are subject to whipsaws so research prior announcement results and the conditions in the market thoroughly before planning an announcement straddle or hedge.
* Announcements are generally regarded as risk events and careful consideration should be given to the trade.
* The Payroll announcement on the 1st Friday of every month has given the most volatile and dependable results.

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