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Posted on Jun 24, 2020 at 11:15 AM
Want to know how I handle Volatile News Events? At this point, you’re probably wondering how I deal with news events, particularly those that produce widespread volatility.
Just before we dive in, for the purpose of context and getting value, this is a three-part article, so if you are yet to read the first 2 series, please PAUSE and click here to start from the very beginning.
First things first…
Before I take a trade, I always check the event calendar. When I do this, I’m looking for news that could influence either of the currencies I’m thinking of trading.
By the way, I use the Forex Factory event calendar. It’s the best one out there in my opinion as I can quickly sort by Impact Level, as well as specific currency. It even converts each event to my local time zone, so I don’t need to worry about that at all.
[If you want to learn how to use the Forex Factory calendar, please post your request for our guide in the box below.]
But with so many events occurring each week, how do I trade while protecting my capital from volatility?
The first thing to know is that I only pay attention to the high and medium impact events. These are the red and orange coloured events if you’re using the Forex Factory calendar I mentioned above.
These selections get rid of a good number of the Forex news on the calendar. I don’t pay attention to the low-impact stuff because it doesn’t seem to cause much volatility and therefore not worth following.
Once I’ve sorted this out, it becomes much easier to zoom-in & trade.
My general rule for trading ahead of a high-impact event is that it cannot be less than 48 hours away. This gives the trade room to breathe before volatility picks up.
So, if there is an NFP data in the next 24 hours, I won’t consider the Japanese Yen. The same goes for the Swiss Franc.
Now, some events keep me from trading technical analysis alone. A few of those events are:
This is not a complete list, but anyone of these events will keep me on the sideline regardless of the currencies I’m considering.
Particularly, you’ll 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 other USD-based pairs like USD/CAD, USD/CAD and USD/CHF.
If you want to become a profitable technical analyst, don’t obsess over the news. All you need to know is when events are happening and their potential impact on the currencies you’re trading.
Everything else is just noise.
Rather, learn to recognize fresh trends & perform technical analysis on your charts. That way you will get the market’s interpretation of an event rather than just your own. This will help increase your confidence in any setup that materializes as a result of the news.
Develop the habit of first checking the calendar before you take a trade without. My preference is the event calendar at Forex Factory. It’s well-organized, customizable and can set up to match your time zone, so no more fiddling with time conversions.
As long as there are no high-impact news events within the next 48 hours, we’re clear to trade all signals for profits. Otherwise, I’ll stay on the sideline and wait for things to settle before considering the next opportunity.
If you want to see my list of “High-Impact News” for each month & their scheduled time, simply send “Monthly News Forecast” in the comment box below to get mail on it.
Have a “pip-full” week ahead!