Price action is just a way of describing the way a market moves. So technically there can be more than one method of price action trading just as there are various indicator combinations. Entering directly in front of high-impact news is nothing more than gambling in my forex opinion. Look no further than the recent Fed rate hike and the subsequent reaction from the U.S. dollar. Arin, I have no doubt that move took a lot of traders by surprise and not in a good way, particularly those in the first and second group mentioned in this post.
A lot of folks got tripped up by the latest Fed decision. It’s always best to focus on the price action and take care in front of such heavy-hitting events than to try to outsmart the market. You’re absolutely right and I’m on same page with you – everything we need is price action and all the news are already priced in.
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Those of us on the sideline during the event didn’t care which way the market moved or why because we get our information after the 5 pm EST close. By that time the market’s reaction was clear so deciding how to approach it was pretty straightforward. I always thought the whole point of knowing the news was to figure out if it would ultimately lead to a rate hike, because that is supposed to be the big thing that will be positive for a currency. Notice that most of the events above affect the U.S. dollar. And while an event like non-farm payroll will be most influential to a pair like the EURUSD or GBPUSD, it can also trigger volatility in cross currencies.
I prefer it because it tells me the result of any Forex news event. Better still, it paints a collective and objective picture of what just happened. So if we buy that pin bar, we’re technically buying the result of that surprise rate hike. We sit on the sideline and wait for the dust to settle.
That’s true, the manner in which you put them answers all the questions one has, continue doing the good work you are doing sir. Too many words, too much information to read ,next time please make it short while message is passed . It was an excellent example of buy the rumor sell the news. Yes, your absolutely right Justin, making our own forecasts from the news is usually just a big and costly waste of time. Most appropriate article after what has just happened from the FOMC’s 0.25% rate hike.
A great article but in some cases you have to hold a position even in events of big news especially if one trades using the long term trades. I just want to thank you for answering the biggest question I had about the difference between trading by following the news and trading following price action. It is true that price action trading will come with better profit. The idea is to catch the move that plays out over the next few days following the event.
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- The second group includes the traders who front run the news.
- An attorney for Moore could not immediately be reached.
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You may also be liable for additional losses beyond your initial deposit, depending on your agreement with the dealer. Forex transactions are quoted in pairs of currencies (e.g., GBP/USD) because you are purchasing one currency with another currency. Sometimes purchases and sales are done relative to the U.S. dollar, http://ericyep.com/?p=146212 similar to the way that many stocks and bonds are priced in U.S. dollars. In other types of forex transactions, one foreign currency might be purchased using another foreign currency. An example of this would be to buy Euros using British pounds – that is, trading both the Euro and the pound in a single transaction.
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Forex traders who went to the dark side could soon be forced to face the consequences. The Australian dollar is special among the major currencies as it generally moves along with the prices of commodities. Because of this the dollar affects companies in different ways.
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Among those arrested was Stephen E. Moore, who formerly served on the foreign exchange committee of the Federal Reserve Bank, prosecutors said. An attorney for Moore could not immediately be reached. However, the study also revealed that while many investors moved from the electronic to the personal, the use of algorithms was also on the rise during forex news the pandemic. The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.
Instead, the dealer’s commission may be built into a wider bid-ask spread, and it may not be clear how much of the spread is the dealer’s mark-up. In addition, some dealers may charge both a commission and a mark-up. They may also charge a different mark-up for buying a currency than selling it. Read investments strategy your agreement with the dealer carefully and make sure you understand how the dealer will charge you for your trades. You will be required to deposit an amount of money (usually called a “security deposit” or “margin”) with a forex dealer in order to purchase or sell an off-exchange forex contract.
For instance, a non-farm payroll report comes out, and the numbers surprise to the upside yet the U.S. dollar weakens. Individual opinions are what get traders into trouble every time. The third group, which I’m a part of, uses the earnings on forex resulting price action to formulate an opinion. Non-farm payroll, CPI, PPI, central bank press conferences and even rate decisions. With that said, if you want to rely solely on price action like I do then this post is for you.
Also, my first job as a trader is to protect the money in my account. I do that by staying on the sideline during volatile news events. Once things settle down, I can begin looking for opportunities.
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Read The Chart, Not The News
In this case, the investor relies entirely on the counterparty to receive funds or to be able to trade out of a position. Individual investors who are considering participating in the foreign currency exchange (or “forex”) market need to understand fully the market and its unique characteristics. Forex trading can be very risky and is not appropriate for all investors. There are different quoting conventions for exchange rates depending on the currency, the market, and sometimes even the system that is displaying the quote. For some investors, these differences can be a source of confusion and might even lead to placing unintended trades. Nearly 20% of forex investors polled in the study said they increased their use of voice trading during the pandemic, which the study called “amazing in context,” due to forex markets becoming almost exclusively electronic.