By Stefan Katanić, Founder
Trading into the news can be risky, but can also be quite profitable if you have a good plan for trading into news events.
On Friday, February 13, several economic news reports were released, including the Michigan Consumer Sentiment reports at 10:00am EST. If the actual reports vary widely from analyst's forecasts, it can have a dramatic effect on the markets.
Prior to 10:00am EST, it was time to take a closer look at the US Dollar Index futures (/DX) on the thinkorswim platform. It was also time to take a look at the Japanese Yen (/6J) and the USD/JPY currency pair:
The US Dollar Index (left panel) was trading at a resistance level, and the Yen (right panel) was trading at a support level. Before the release of impact economic news, it's important to look at volume and price action before the actual release of the news.
Since the Michigan Consumer news reports were being released at 10:00am, the 9am-11am time period was selected in Nadex for the USD/JPY Forex pair. Now it was time to wait for the news release:
Courtesy of Investing.com
The Michigan Consumer news reports missed estimates badly, which had a negative impact on the US Dollar. As soon as the news was released, the market plummeted, andthe following trade was placed:
- Contract: USD/JPY >119.00 (11AM)
- Expiration: Fri Feb 13 11:00:00 EST 2015
- Direction: SELL
- Quantity: 2
- Price: 32.00
Two contracts were sold, with a maximum risk of $136 and a maximum reward of $64.
Click on Chart to Enlarge
As the chart clearly illustrates, the market dove on the news, before trading sideways for the rest of the day. This trade was never threatened, and expired in the money at 11:00am EST.
About Stefan Katanić:
Stefan is a founder of Traden Group. Traden Group provides live trading rooms, signals and setups for Nadex, IG Group and Forex traders.
Watch the full trading education and tips from the Traden Group on Trading Economic News with Nadex Here:
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The Trading Pub Team