Timing is everything in forex. Time it right, you win. Get your timing wrong, your money goes up in smoke.
In a fast paced market with periods of intense volatility like the forex market, timing is essential. There is a saying that “the trend is your friend till it ends”. I will say that the “trend is your enemy if you get in too late”.
Traders are advised to “trade fundamentally, enter technically.” This implies that traders are expected to follow the direction of a high impact news item. But in doing so, traders must use their technical analysis to enter at the right time.
What happens if entries are not timed properly? These are the scenarios that could occur.
1) Some high impact news hits the news wires and it favors a long trade. You go long, but you discover that the market has spiked by almost 80 pips about a second after news release. Your entry is still pending, waiting for the broker to fulfill it. Too late. Prices are too far gone and you are asked to “REQUOTE”. Not wanting to miss out, you re-enter the market not minding the prices, and your order is instantly fulfilled. Suddenly, the price starts to retrace wildly, and you are stopped out, just in time for the price to resume its move northwards. It’s almost like the market maker was watching you to do you in.
2) The second scenario is a bit like the first, but instead of a requote, your order is filled at a price so far away from market price, it will take a miracle move in the trade direction to break even, let alone make a profit. Slippage sucks.
Let’s explain the two scenarios. In a high impact news trade, the news feeds are received by the institutional investors before anyone else via premium news services like Bloomberg and Reuters, who charge thousands of dollars a month for this. A team of veteran traders will be waiting to analyze the news and hit the trade buttons fast. The sheer volume of such trades sends the currency price candlesticks spiking. Sometimes the spikes happen even before the retail traders get the same news. As such, any trade entered by a retail trader at this point will most likely not be fulfilled; requotes follow. If a trader enters the trade at this time, he will meet the institutional guys offloading their positions to take profits, and he will get hit by the unavoidable retracement that follows.
The two scenarios are a case of wrong timing at work.
How Can You Accurately Time Your Trades to Avoid Losses?
For news trades, it is pretty obvious here that you should not try mixing it with the big dogs. You will get blown out by the two scenarios I painted again and again. Only enter news trades when the initial madness has died down. Soon, the market will respond in a slower and more purposeful direction to the news trade, as we see here from the Non-Farm Payroll report of June 3, 2011.
Secondly, use pivot points in addition to your other technical indicators to determine if you are still within touching distance of a profit. If a long trade is closer to a resistance than a support level, the chances of that trading making a profit is lower than if the entry was closer to the support level.
There are many tips, but hang on to these two for now.
Traders are advised to “trade fundamentally, enter technically.” This implies that traders are expected to follow the direction of a high impact news item. But in doing so, traders must use their technical analysis to enter at the right time.
What happens if entries are not timed properly? These are the scenarios that could occur.
1) Some high impact news hits the news wires and it favors a long trade. You go long, but you discover that the market has spiked by almost 80 pips about a second after news release. Your entry is still pending, waiting for the broker to fulfill it. Too late. Prices are too far gone and you are asked to “REQUOTE”. Not wanting to miss out, you re-enter the market not minding the prices, and your order is instantly fulfilled. Suddenly, the price starts to retrace wildly, and you are stopped out, just in time for the price to resume its move northwards. It’s almost like the market maker was watching you to do you in.
2) The second scenario is a bit like the first, but instead of a requote, your order is filled at a price so far away from market price, it will take a miracle move in the trade direction to break even, let alone make a profit. Slippage sucks.
Let’s explain the two scenarios. In a high impact news trade, the news feeds are received by the institutional investors before anyone else via premium news services like Bloomberg and Reuters, who charge thousands of dollars a month for this. A team of veteran traders will be waiting to analyze the news and hit the trade buttons fast. The sheer volume of such trades sends the currency price candlesticks spiking. Sometimes the spikes happen even before the retail traders get the same news. As such, any trade entered by a retail trader at this point will most likely not be fulfilled; requotes follow. If a trader enters the trade at this time, he will meet the institutional guys offloading their positions to take profits, and he will get hit by the unavoidable retracement that follows.
The two scenarios are a case of wrong timing at work.
How Can You Accurately Time Your Trades to Avoid Losses?
For news trades, it is pretty obvious here that you should not try mixing it with the big dogs. You will get blown out by the two scenarios I painted again and again. Only enter news trades when the initial madness has died down. Soon, the market will respond in a slower and more purposeful direction to the news trade, as we see here from the Non-Farm Payroll report of June 3, 2011.
Secondly, use pivot points in addition to your other technical indicators to determine if you are still within touching distance of a profit. If a long trade is closer to a resistance than a support level, the chances of that trading making a profit is lower than if the entry was closer to the support level.
There are many tips, but hang on to these two for now.
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