In today forex faq, we have a question from one of our fellow trader regarding the break the bands strategy. In fact, to me, this question is applicable to all strategies.
Below is the question:
Hi, do you hold a trade over a news event when using “Break the band strategy”? Example i enter a EUR/USD trade at 2 pm and there’s a news event at 4 pm which is EUR French Flash Manufacturing PMI. appreciate any of your help. Thanks! Regards
First of all, I am a complete technical trader which means that I totally ignore any news analysis. In fact, I do not even take note of any major news release date at all.
This is mainly because we can never know which way the market is going to move in after the news release as it is controlled by human sentiment. You may think that the price should move down for that news but it went up instead.
I cannot deny the fact that some of the losses or wins are created by the news instead. For example, I am in a LONG trade and suddenly a news is released and the price moved up 100 pips and I made a 50 pips profits. It could also be the other way round where I am in a LONG trade and the news release causes the price to move down and trigger my stop loss.
However I choose to ignore those news as the break the bands strategy has been profitable for me for so many year despite ignoring the news. The purpose of trading for me is to relax and for me to worry about news is very frustrating for me.
Therefore for your question above, I will say that for all these years of trading, I have never exited a trade prematurely due to a coming news release. However I know of some traders who will exit all their positions before the release of a major news.
Therefore there is no right and wrong answer for your question and it all boils down to what you think is appropriate for you. For me, I like the freedom of trading and therefore choose to ignore the news but if you are a person who like to read news and articles about finance, you can definitely put that into your trading plan as well.
I hope that I have answered your question and for those of you who are reading this post now, please feel free to give your comment below as it will be very valuable for everyone here.