Members Area

How FOMC News Affected our USDSEK Trade

indices-magnifine glass

Keep that champagne on ice! Despite a great start to our USDSEK sell trade which we entered on the 18th (and got triggered into on the 18th), yesterday’s FOMC meeting forced an early exit from the trade.

Our USDSEK trade didn’t go the way we anticipated – or wanted. However, the technical argument for a sell was a convincing one to say the least...as technical traders we trade what we see – not what we think.

We did enjoying a splurge of profit after entering the trade and duly trailed our stoploss on the 19th  November as it represented the second seller bar since the USDSEK sell set-up and we didn’t sustain a full hit and managed to preserve our capital. Yesterday’s outcome of the FOMC meeting was a crashing Euro and the US Dollar subsequently spiked up.

However, the trade’s outcome was a typical example of how news can sometimes go against us.

So why do we trade around news?

Put simply, we don’t care about news if the reward/risk makes sense. In the case of USDSEK, we had a reward potential of 8% (risking 2% on the trade) so can benefit from probabilities in our favour. No, I don’t have a crystal ball and have no idea what these policy wonks are discussing. Nor do I particularly care. All I do know is that the market can do three things in response to news:

  • Cause the market not to react at allwhat is risk management
  • Send the market against my trade
  • Send the market in favour of my trade

If the news doesn’t cause the market to react then fine – we still have a great technical argument for our trade. So that leaves the remaining question: will news be for or against our trade? There is a 50% chance it will therefore agree or disagree with our trade. This is fine though!

You see, high reward trading and news is very much like flipping what side a coin is going to land on: heads and tails, but knowing that if you are proven right by the market, you stand to make a lot more than you stand to lose if you are proven wrong.

If news is in our favour then we stand to hit target and make 8% in a shorter space of time. If it goes against us then at least we know and have full control over what we could lose – a maximum of two percent. However, in our case, it was far less than this as we adjusted our stoploss, according to our strategy’s rules.

728-90 trade10minsaday2 copy

The following two tabs change content below.
The Lazy Trader is a fund level Forex Trader who trades for no more than ten minutes a day. If you want to learn to trade profitably in his set-and-forget style, have a look at his forex training

Comments

  1. Pingback: Trading USDSEK: Second Entry Short Granted


Leave A Comment

Disclaimer: All content on this website is intended for educational purposes only and "The Lazy Trader" (TheLazyTrader.com) will not be held responsible for any losses incurred. The information of this website is "general advice only" and does not take individual circumstances into account so do not trade or speculate based solely on the information provided. But viewing and participating our and the website's content, you fully accept and agree that this website offer's general advice only and that trading the financial markets is a high risk activity and should understand that past performance does not indicate future performance and that the value of investments and income from them may go up as well as down, and are not guaranteed. No representation is, has or will be made that any website visitor, client or content viewer will or is likely to achieve profits similar in any way to those discussed on this website or this website's subsidiaries. You will not hold any person or entity responsible for any losses or damages resulting from the general advice provided here by "The Lazy Trader", TheLazyTrader.com, Rob Colville Trading, its employees or directors or fellow clients. "The Lazy Trader" (www.TheLazyTrader.com) and "Rob Colville Trading" are divisions of The Lazy trader Ltd.

Risk Warning! Forex, Futures, Options and such Derivatives are highly leveraged and carry a large amount of risk and is not suitable for all investors. Please do not trade with more money than you can afford to lose. All content (news, views, analysis, research, trade ideas, commentary, videos or articles) on this website or this website's subsidiaries does not constitute as "investment advice".

© Copyright 2012 The Lazy Trader (www.TheLazyTrader.com) - All Rights Reserved