Items Tagged With trade the news

New Home Sales report was released at 10 am EST.  My FXEngine automatic trade was initiated and lost again.  There was an initial spike down but my moderate rated trade got in at the very bottom of  the spike.  I lost 9 pips.  

I actually almost canceled my automated news trade today but opted to decrease the contract to 1 to see what might happen.  I really didn't expect a trade to even go off but unfortunately it did.  Today may have been a day to use the conservative engine which may not have gone off.

In the 4th week of news trading, I'm at +20 pips total.  I'll continue with this in hopes of catching one of those news trades that is a really big 1 way mover.

I had just about written off FXEngines as a viable option for news trading but not as a trading platform.  Here is a question I sent to them yesterday:

I'm wondering if the following can be automated?

Here is an example:

1. Schedule order at 1:30 am at a specific price with a 30 pips stop and a 30 pip limit
2. Order executes at or after 1:30 am with a 30 pip stop, 30 pip limit.
   
3. If the position goes in my favor and is up at least 20 pips at anytime, move the stop to breakeven
4. On a long position, once profit reaches 30 pip profit, trail the stop using last candle low and the reverse for a short position

This is possible with FXEngines FX Trader Plus package which costs $1.00 per lot traded.  You get premium exits like the one described in my question, exit creation, US news trading engines for not only the EUR/USD but the GBP/USD, USD/JPY, and USD/CHF, European news event engines, Japanese news event engines, and Australian news event engines.  I don't see myself taking advantage of the news engines but if I can totally automate my trades via this platform, I will.  

Let's think about the cost of the FX Trader Plus package.  $1 per lot traded.  If I make 20 trades a month at 3 lots each, that's 60 total lots for a price of $60.00.   How much does it cost for the Oanda API where you also have to do the programming, $600.00 a month.  Quite a difference for losing a little bit of flexibility.  The drawdown here is that you are limited to only FXCM as a broker but this may change in the future. 

I've signed up for the FX Trader Plus and as always will let everyone know how it goes.

If you're interested, follow this link and use me as a referral: http://www.fxengines.com/register/signUp.jsp?referralUser=rparedes

Tomorrow, the trade balance report is released at 8:30 a.m. EST.  It seems like traders are waiting until then to make a move and according to most experts, so should we. 

Economic reports such as trade balance can provide some wild swings.  Therefore it is wise to wait for the market to demonstrate the sentiment.  What are the different phases of trading news?

1.   The market will hesitate and form sideways action before the news is released
2.   News is released
3.   Market reacts
    a.  If the news is a surprise, the reaction is strong
    b.  If the news is not a surprise, the reaction will be tempered 

You can see the sideways action before the 8:30 announcement.

We could have put 2 orders in, 1 above the upper channel line and 1 below the lower channel line.

1.    Buy above 1.1980
2.    Sell below 1.1955 

Rules of Trading the News:

1.    Let the move happen
2.    Trade the Reaction 

Look what happened at the 8:30 announcement last month:

Breaking above the upper channel, if you went long, you would have profited 40 pips.  But what happens afterwards is even more unpredictable.  Not only does the pair retrace back to the sideways channel, but it breaks down 60 pips below the lower channel.  That is why you must be cognizant of the possibility of wide swings.  In this case, if you weren't greedy, some of the profit from the initial move would be retained.

With the threat of falling to unprofitability after 4 weeks of automated news trading via FXEngines, redemption prevailed this morning.

My automated moderate trade entered long on the EUR/USD at 1.2724 at 8:30:58 and closed about 15 minutes later at 1.2759 for a 35 pip profit. 

So after 4 weeks and 17 trades, I'm up 48 pips.   I remain suspicious of this method of trading but it makes me realize even more how important risk and reward are.  Typically a losing news trade will cost me 10 pips.  In 4 weeks, I have 7 wins and 10 losses for a win percentage of roughly 40% yet I remain profitable. 

I'm done trading for the week.   It's time to take an overdue weekend break.  We have the 4th of July holiday on Tuesday of next week so I'm not sure when I'll jump back into the market.  

Good thing there really isn't any news to trade....

I got a quick response from the FX Engines CEO regarding my and Wim's concerns stated in the previous post:

I will answer that with three points:

1 - We do not intend to always deal exclusively with FXCM. We really enjoy our relationship with them but it's not exclusive and it's always been in our plans to add additional dealers.

2 - We have a relationship with them that is very good. They know what we are doing, and they know we are not dealing ahead of their prices in any way. I don't expect them to put our accounts on manual, but if they did we have channels with them to work that out. There will be trades where their whole system goes to manual, and there's nothing we can do about that.

3 - We don't do anything that creates riskless trades (as some traders do who deal in advance). That is usually the only reason a trader would go manual. The difference between us and a trader is we can show demostable evidence that our system trades exactly as it should, as we say, whereas a trader cannot always provide that.

Overall I don't think we have a problem until we have a problem. So far, so good. We just executed literally hundreds of trades in seconds, fully automated. It's a highly functional system.

I know I've been mentioning a lot about FX Engines the last week but there is nothing yet to disprove the usefulness of this platform yet.  I will be trading the news live tomorrow.  To give some of you a preview who have not yet looked into it, here is what they recommend tomorrow.  Note that this recommendation can really only be traded using their platform but it may give you some insight on what kind of volatility we are looking at and what to watch out for.

RETAIL SALES/PPI/BUSINESS INVENTORIES

Multiple events at a single time can be tricky news trades, so plan carefully.

Our analysis of the Retail Sales release shows that this trade reaches a high of 51 pips on average, with a trade tipping point near 40. However, keep in mind that this release also highlights PPI and Business Inventories. A lot of news can cause the market to pause and potentially reverse. It doesn't take a lot to do well with a news trade, so we recommend a conservative approach to this trade, with three long orders and three short orders as follows:

• Instant Spike Long & Short with New York 12 exit
• Normal Spike Long & Short with Las Vegas 12 exit
• Reserved Spike Long & Short with Moscow 12 exit

Set your entry timeout to 4 minutes and watch the trades unfold. Your exits are automated, but if you see a big spike don't be afraid to change the exit to a more aggressive profit target.

All of these orders may not trade, depending on price action. If you want to be a bit more aggressive, extend the timeout to 8 or 12 minutes to trade a potential reversal. 

I kind of broke the rules of my forex trading system this morning when I got a signal at 10 am this morning.  My rules say to only trade during the US/EUR session overlap which 10 am clearly falls within but sometimes you have to adapt.  Today I did just that because of the FOMC announcement coming out at 2:15 pm.  I have to wait and see if this saved me from a loss or if I missed a good trading opportunity but either way, I think I did the right thing.  I don't want to make a habit of doing this but this is the one and only announcement where I can see doing this.  During my backtesting, I have not seen a profitable trade coming after 10 am.  By this time I would think most traders are trying to settle up on their positions especially today. 

Even though the rules were bent, I think that to be successful, you have to constantly adapt to the changing environment and tweaking rules or flat out changing them is necessary.  I'm not changing them because I'm overly emotional or fearful, I'm just doing it because when I woke up this morning, I told myself not to trade until after the FOMC announcement.  I'm hesitant to open any positions before this and expected more consolidation or the classic, Buy the Rumor, Sell the News.