Several firms which market e-mini trading indicators are currently advertising systems for trading the news. From a personal standpoint, I really enjoy trading the news; but it is certainly not for the uninitiated or faint of heart as you can certainly take a sizable chunk of cash out of your e-mini futures trading account if you guess the wrong way. Of course, the operant word in the previous sentence was “guess.” In my world, any trade that includes the word “guess” is a deal breaker.
One particularly aggressive advertisement claim that it could teach traders how to effectively trade both “expected announcements and unexpected news events.” I don’t claim to be the brightest bulb in the room, but there has never been an instance in my lengthy trading career that I was able to predict unexpected news. You know why? If news is indeed unexpected, the market has already reacted before you get a chance to react. Here is my thesis: Unless you have a good deal of experience and have been following a particular segment of the news with great intensity you don’t have any business trading the news. Also, to predict unexpected news would require some level of clairvoyance, which I do not possess. So we can write off any claim of trading unexpected news (which is, by definition, news you have no idea that its occurrence is imminent) as spurious. If you think about it some, it’s fairly amusing to suggest trading unexpected news. How would you know when to trade?
Now returning to the reality, let’s examine an effective method for trading expected news. These are news events which are scheduled in advance and usually deal with unemployment numbers, producer price indexes, GDP and other important financial announcements. The use of the OCO (one cancels the other) orders can be very effective (when used properly) to put some cash in your pocket when news is imminent. It is also important to note that certain news events will have very little effect on the general market, but may have a pronounced effect on an individual market. For example, the crude inventory report usually doesn’t move the equity market to any degree; on the other hand, the crude inventory report often sends the crude market and to absolute disarray with numerous spikes in direction and intensity.
When getting ready to set up your OCO order it is important to carefully consider the parameters of your trade and the feasibility of success. I generally take a look at the Average True Range (ATR) and a set both my buy and sell orders 1.5 x ATR and wait for the news to hit. There are times when I feel strongly that a report is going to go one particular direction and I will shade my OCO order to reflect that bias.
The purpose of this article is to pique your interest in news trading, and not an extensive description of specific methodologies you may need to employ to attain success. However, a little bit of research and some practice on a simulator may interest you and in news trading.