The 411 On Forex News Trading

Trading Forex with the news can bring up a few questions:
What kind of strategies can be used?
How soon should a trade be placed before the news?
What are the risks?

To begin with, the term Forex needs to be defined. There are many types of Forex: Futures Forex, Futures Forex options, CFD Forex, Spot Forex, Spot Forex Options, Binary Forex, and Spreads Forex. There’s even the Forex you might use to exchange money at an airport for the currency you need to use in the country you are visiting, and the real Forex when you barter in the streets to buy a souvenir in another country.

Assuming that you are trading spot Forex, you won’t want to trade using an OCO (one-cancels-the-other) order. The danger in trading that way is that it will move or oscillate and kick you out. If you are trying to do a straddle similar to one you may have placed on Nadex, which is a simultaneous buy and sell order on spot forex, you would make nothing.

It’s important, when trading the news, that you have a plan. Most news trades should be well researched and thought out before the news is even presented. You can research how the market has reacted to similar news over the months or years. You can decide what strategy will be the best one for you to use. Remember, that when demo trading, it’s different than when you trade live. In demo, your orders will be filled; your order will not be jumped over. When trading live, you may find, in the fine print of your agreement with your broker, that it’s perfectly legal for brokers to not fill the orders during high speed news moves.

You may try different strategies that might work well for a few trades, and then they come back and clean your clock! You may have a good run, but then your losses may outnumber your wins.

You will notice that the plan is color-coded for different trading plans, or if it’s just something to be aware of. The following images will show how to plan your trades.

The previous image shows the news plan to trade the oil inventory report with an iron condor/butterfly going in to the news. When this plan was made, it was decided what to do:
Iron condor/butterfly
When it should be traded
What to do if the inventory is higher or lower than expected
What to do based on Implied Volatility
Used with Expected Range Indicators
This plan tells you to “check out expected ranges on 1 hour time frames - they will be drawn in advance on the chart showing the channels right before the release.” This refers to charting being used at Apex Investing Institute. Their website is listed below.

This is a great example of a possible news strangle/straddle. Once again, the plan was made to help you in your trade. It shows:
When to get in
What expiration to look for
The maximum risk that you are looking for

There are other things to consider. It’s paramount to realize that a news trade is a fast moving trade. You don’t want to place this type of trade days before it’s going to happen. Time is in your favor. A news trade should be over in no more than six hours. In most cases, news trades are between 30 and 60 minutes.

If you are set on trading spot Forex, without using Nadex, you can. You could purchase your contract and then hedge your Futures/Forex position with a low cost Nadex option. If you choose to do this, you are covering some of your risk.

Because Nadex is an options derivative, you can see on the chart below how it is related to the underlying ES, or E-mini S&P 500.

In looking at this image, you can see that they both have the same expiration date and time. Both instruments have the same strike/floor of 1965. CME has a wider bid/offer spread than Nadex, but you can see how they correspond to one another.

The best choice for trading the news is with Nadex. There you can trade Binaries and Spreads with limited risk. They are option derivatives of futures and Forex contracts. You can use different strategies with these fast moving options. You can fade the market using low risk OTM (Out of the Money) binaries, with no stop loss or ITM (In the Money) binaries and collect premium.

In summary, here are the points to remember from this article:
Ideas for trading the news using spot Forex, with or without Nadex.
A few ways to limit your risk.
Examples of how to set up your trading plan.
How Nadex and the underlying markets are related and can both be traded simultaneously, if that is your plan.
Make sure you have a plan.

At Apex Investing Institute, there are several courses to help you further understand your trading options. To learn more, go to www.apexinvesting.com. Apex Investing Institute offers free education, and free access to the Nadex Binary and Spread Scanner Analyzers. Member traders are invited to trade in the rooms, take advantage of trade signal services, have key indicators and access the Apex Forum. The forum content is updated daily and includes over 7000 members. In a supportive learning community of seasoned as well as up and coming traders, traders of all levels learn how to trade Nadex binaries and spreads in depth, as well as futures, forex, stock and options, and gain an edge for successful trading overall.