At either of those points, all trades are closed and the profit or loss is realized. This makes the trade management much simpler. It just means watching two numbers.

The average entry rates on your buy and sell side. The average entry rate is updated iteratively each time a level on the grid is reached and a new trade is executed:.

This simple trade management means you have the option to run either or both grids by hand. The single up grid, which is hedged by design, has a fixed downside risk. This is set by the number of grid levels used, and the interval between each of those levels. Where L is the number of grid levels on both sides, and S is the gap in pips between each level. So in the example above, a single up grid with 3 levels above and below the start point, and a gap of 10 pips, has a maximum potential loss of:.

How do you decide when to start the grid? Creating an algorithmic indicator for this arrangement is fairly easy. This is because important data releases are typically preceded by the following conditions:. Depending on the significance of the event, these conditions can begin minutes, hours or even days before.

There are standard indicators that can help you pick up this sort of contracting volatility channel. One thing though is to use a small enough time scale. If you use too large a scale, the less significant events may get lost in market noise. In actual fact this was a non-event, since everything announced was in line with market expectations.

Nevertheless, you still see the pattern of reduced volume prior to the event as traders anticipate the potential surge in volatility. Whether the volatility squeeze is caused by a pending news event or not, the price action following such conditions is nearly always the same. Simple algorithmic indicators may also pick up non-release periods. Volatility tends to be cyclic at any scale and invariably picks up after low periods. The typical scenario after a squeeze is a break-out from the trading channel.

In either case, the grid setup can profit from this move. To work out a profit distribution, both grids were back-tested 1, times each with randomly generated EURUSD rates. This was done with two volatility settings: normal and high.

Normal volatility volatility distribution for a typical news event High volatility volatility distribution for a high-impact news event. These both modelled volatility patterns which are typical around economic releases. The four grid runs each used 1, price ticks at 5 minute intervals. So the total sample size was 4 million ticks. A variable spread was also used with an average of 0. Grid strategy Volatility Avg. com Table 2: Returns generated by both grids over 1, test runs.

This setup then reaches its maximum profit. The Excel workbook provided below contains both grid setups. The spreadsheet enables testing against either real or simulated data. You can´t predict volatility, so in essence it´s quit difficult to choose which grid to use….

This is just a way of keeping track of the average entry price for example if you are using a calculator and if you do not want to keep track of all of the entry prices. Say you have the following orders:. Sorry, just found your Facebook page on the right corner, my mistake for the above post. Nevertheless, thank you once again. Your articles were explained so thoroughly, definitely could see your genuine intention to help all your readers.

Thank you Steve, would appreciate if you have a Facebook page or email. Thanks mate. Steve, hello, Great articles! can you give me link or contact with me. Start here Strategies Technical Learning Downloads. Cart Login Join. Home Strategies. In fact, many avoid trading altogether during these times. They stay out of the market or hedge their positions — just in case the unexpected happens. Trading news and economic data releases © forexop.

Figure 1: Typical price action before, during and after a news announcement. BEST SELLER. Figure 2: Opposing grid configurations: Single up , verses single down. Copyright © forexop. Figure 3: EURUSD chart showing activity around the release of FOMC policy statement. Figure 4: Returns of the two grid strategies. Figure 5: Long term performance chart of single up : normal volatility vs. high volatility. Figure 6: Long term performance chart of single down : normal volatility vs.

Download file Please login. With a variable spread broker, the problem with news trading is that when markets get volatile, the spread can increase exponentially.

This can cause your trade to be immediately negative, even if you technically received a good price on your entry. Spread widening is often limited and if the spread is too wide, it may be best to abort your trade because the widespread is seen when banks think the risk is too high to be exposed.

Keeping these two issues in mind, it's important to understand your broker's policy on news trading. You may want to consider trying it in on a demo account first to get a reasonably good simulation. Reputable forex brokers have a demo system that is a full replication of the live system so it should be no different than live trading. News trading can be profitable, but it is also dangerous.

If you underestimate the impact of the report, or things don't quite go as planned, your account can be adversely affected. Overall, we don't recommend that you trade at news time unless you are trading long term. That said, everyone has their preferred method and it is possible to make a profit trading the news short term if you pay close attention and are quick and nimble.

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Who can blame them? Why is it a challenge? Firstly, most of the technical indicators that forex traders use as pointers tend to break down around these events. The second and more perplexing challenge is that the impact of news can vary drastically according to factors such as:. If sentiment towards a currency is positive, a good number tends to re-enforce this and can add fuel to a bullish trend.

The market has already factored in lower expectations, and more of the same has less chance of spooking traders. New information may cause the market to move above or below key levels for a short time — but these moves often reverse and frustrate all those traders caught on the wrong side see more on breakout trading.

Rapid whipsaw type price activity also takes place as the market digests the new information. The initial move happens in the seconds to minutes after a release. See Figure 1.

bad economic data means sell, good means buy. But any new item of data has to be weighed-up against the current economic backdrop and other interrelated factors. For example, positive economic news out of the U. S may send the dollar lower. dollar and towards riskier, higher yielding assets. One reason is better forward guidance and communication by agencies such as central banks and government departments.

Because of this, the impact of data is often priced in well before the official release. Given the above complications, why even try to trade these events at all? Instead of trying to anticipate the market reaction, a more reliable approach for traders is to use a strategy which profits from volatility — basically movement of price in either direction. One strategy for trading around these events is based on a hedged grid system.

You can see my introductory article on forexop here. After the event, the price generally breaks-out of the channel in either direction and whipsaws or trends until a new equilibrium is found.

In doing so the price crosses some or all of the grid levels. This ebook is a must read for anyone using a grid trading strategy or who's planning to do so.

Grid trading is a powerful trading methodology but it's full of traps for the unwary. This new edition includes brand new exclusive material and case studies with real examples. There are several grid configurations that can work in this scenario. Single-up grid: This is a trend follower.

Trades are opened in the direction of the trend. This configuration works well when an event results in a single, directional movement either upwards or downwards.

In this setup, the opposing grid levels act as stop losses. So having all your grid levels triggered would effectively cause you to be stopped out. The grid is hedged, and has a fixed downside limit, but an unlimited upside. Single-down grid: This configuration trades against the trend. That is, it buys in a falling market, and sells in a rising market. This setup can work well when volatility is high and whipsaw price action is expected.

This grid has a limited upside, but an unlimited downside risk. The single up system reaches its maximum loss when all trades within the grid execute. When all trades in the single down grid execute, the system reaches its maximum profit potential. See Table 1. Basically, the rule for trading news events is this: If high volatility is expected, use the single down grid.

Otherwise use the single up grid. The single down grid is a clear winner in highly volatile situations. This is because it reaches its maximum profit potential when the price crosses the grid at all levels and all trades are executed see Table 1 above. Dual grid: One other option is to run the two grids simultaneously to create a dual system. That means managing the overall stops and take profits on both sides. This can be useful under certain conditions, but it needs more complex trade management.

Wide stop losses can be put in for good measure. With the single up grid, closing trades separately is risky because it can leave you unhedged. The most efficient way to work is to have an overall stop loss and take profit target for the grid. At either of those points, all trades are closed and the profit or loss is realized.

This makes the trade management much simpler. It just means watching two numbers. The average entry rates on your buy and sell side. The average entry rate is updated iteratively each time a level on the grid is reached and a new trade is executed:.

This simple trade management means you have the option to run either or both grids by hand. The single up grid, which is hedged by design, has a fixed downside risk. This is set by the number of grid levels used, and the interval between each of those levels. Where L is the number of grid levels on both sides, and S is the gap in pips between each level.

So in the example above, a single up grid with 3 levels above and below the start point, and a gap of 10 pips, has a maximum potential loss of:. How do you decide when to start the grid? Creating an algorithmic indicator for this arrangement is fairly easy.

This is because important data releases are typically preceded by the following conditions:. Depending on the significance of the event, these conditions can begin minutes, hours or even days before.

There are standard indicators that can help you pick up this sort of contracting volatility channel. One thing though is to use a small enough time scale. If you use too large a scale, the less significant events may get lost in market noise. In actual fact this was a non-event, since everything announced was in line with market expectations. Nevertheless, you still see the pattern of reduced volume prior to the event as traders anticipate the potential surge in volatility.

Whether the volatility squeeze is caused by a pending news event or not, the price action following such conditions is nearly always the same. Simple algorithmic indicators may also pick up non-release periods. Volatility tends to be cyclic at any scale and invariably picks up after low periods. The typical scenario after a squeeze is a break-out from the trading channel. In either case, the grid setup can profit from this move. To work out a profit distribution, both grids were back-tested 1, times each with randomly generated EURUSD rates.

This was done with two volatility settings: normal and high. Normal volatility volatility distribution for a typical news event High volatility volatility distribution for a high-impact news event.

These both modelled volatility patterns which are typical around economic releases. The four grid runs each used 1, price ticks at 5 minute intervals.

So the total sample size was 4 million ticks. A variable spread was also used with an average of 0. Grid strategy Volatility Avg. com Table 2: Returns generated by both grids over 1, test runs. This setup then reaches its maximum profit. The Excel workbook provided below contains both grid setups. The spreadsheet enables testing against either real or simulated data.

You can´t predict volatility, so in essence it´s quit difficult to choose which grid to use…. This is just a way of keeping track of the average entry price for example if you are using a calculator and if you do not want to keep track of all of the entry prices.

Say you have the following orders:. Sorry, just found your Facebook page on the right corner, my mistake for the above post. Nevertheless, thank you once again. Your articles were explained so thoroughly, definitely could see your genuine intention to help all your readers. Thank you Steve, would appreciate if you have a Facebook page or email. Thanks mate. Steve, hello, Great articles! can you give me link or contact with me.

Start here Strategies Technical Learning Downloads. Cart Login Join. Home Strategies.

So having all your grid levels triggered would effectively cause you to be stopped out. The average entry rates on your buy and sell side. The second and more perplexing challenge is that the impact of news can vary drastically according to factors such as:. Value at Risk: How to Calculate Forex Risk To manage this risk, what some do is make a simple guess to estimate the potential loss involved. Once you have established which reports are important, you'll need to watch the market's reaction to the numbers for a while.

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