POST-RELEASE TRADING STATEGIES
1. Trend following strategy
This strategy involves the use of multiple time frames, as well as, well-defined levels of support and resistance that come into play after a news release.
This strategy can be used by traders when the market price is near a level of support or resistance, but not quite there yet. Volatility after the news release could push the market towards the trendline. If the trendline is respected, traders can trade in the trend direction and trade the possibility of a bounce.
These 4 points can be of assistance to this type of trade:
- Trend direction can be determined on a daily chart
- Draw resistance and support lines
- Select a forex time frame anywhere from 1 - 4 hours
- Sell near resistance in the downtrend, and buy near support for the uptrend
Keep in mind that news releases have the potential to break through longstanding levels of support and resistance which underscores the importance of using tight stops when pursuing this strategy.
This strategy uses a five-minute chart and waits for market volatility to reveal a range. For illustrative purposes this section incorporates the US Non-Farm Payroll (NFP) release as this often has the greatest potential to move the market.
Wait 15 minutes after the NFP release for three five minute candles to close. Note the highest and lowest prices of the three candles that are closed. Next, place an order to enter at the highest price. An entry order to enter at the lowest price will be placed. After an order has been triggered, targets may be set at twice distance from the channel high/low. Stops can also be placed above resistance for short trades or below support for longer trades.
This strategy has a disadvantage: volatility can cause price to move above or below the short term range. An entry order is then placed and then reversed to stop loss.
The following strategy can be used:
- You can customize the chart settings to display 5-minute charts
- Pay attention to the highs and lows in the three first candles
- When the price falls below or above the range, you can set entry orders
- Limits and stops
- You can delete the unfilled order