News trading strategy is one of the most effective ways to secure big profits in a short time. Sadly, very few traders in Australia knows the perfect way to trade the major news. You may think to trade the major news, you need to understand the fundamental data only. But in reality, you need to have in-depth knowledge of technical analysis and only then you can find some good trade setups during the volatile market.
Without having extensive experience in the Forex market, it’s not a good idea to trade the major news. But does this mean the new traders will never trade the high impact news? Of course NOT. This article is mostly devoted to the new traders who have fair technical knowledge but still don’t know the proper way to trade the major news. To trade the major news we will use the 100 day SMA only. Let’s learn the amazing technique of news trading system.
Dynamic Support and resistance level
The 100 day SMA acts as dynamic support and resistance level. If the price trades below the 100 days SMA, you consider the market trend is bearish. On the contrary, if the price of a certain asset trades above the 100 days SMA, look for long trade setup since the overall trend is bullish. But this information is not going to help you to trade the major news. We need to dig deep into the details of 100 days SMA.
You will be trading the 100 days SMA based on two principles. The first principle will act as rejection strategy and the second one will act as a breakout strategy. Let’s give you a simple example.
Let’s say, EURUSD pair is in an uptrend since the price is well below the 100 days SMA. Right before the NFP news release, you notice a sharp rise in the price. Since the 100 day SMA acts as dynamic support and resistance level, you can set pending short orders before the release of NFP data. Make sure you 10 pips or else you might have to lose a big sum of money. If the fundamental data favors your direction, chances are very high the market will touch the 100 days SMA and head downwards.
Trade with a high-end broker
To trade the major news, you need to use the best Forex trading account. Smart traders love to trade the market with Saxo since all the trades are executed at the exact price. Most importantly you will not face heavy slippage during the high level of volatility. For instance, if you execute a short order with a 10 pip stops, the market might break above the 100 days SMA. If you trade with the low-end broker you will experience heavy slippage. But if you trade the market with a high-end broker, chances are very high you loss will be limited to 10 pips.
Executing trades after the news
By now you know the perfect way to place a trade before the release of news data. But this strategy is often considered a little bit risky. Some retail traders prefer to trade the market after analyzing the news data. Considering the example of EURUSD, assume we have strong NFP data release. The market will fall. So, wait for a minor retracement of the price towards the 100 days SMA and execute short orders with a stop above the 100 days SMA. Though this trading strategy is extremely effective still you need to master this technique by using a demo account.
Making money based on news trading strategy is very simple. It doesn’t require extreme knowledge of the trading industry. Take advantage of the demo account and try to use the 100 days SMA and create a balanced news trading strategy. And never trade news with more than 1% risk.