Trading the News can be daunting for a new trader and is usually NOT recommended due to whipsaw potential and the seeming uncertainly in the market.
However When taking into account the Fact that THE NEWS DOES NOT DETERMINE MARKET DIRECTION, IT ONLY CONFIRMS THE MOST CURRENT DAY'S TREND.
We should be looking for EARLY signs of Strength/Weakness.
This includes Prior day Strength/Weakness on 15 minute close, Globex Strength/Weakness, Market Bias and the Opening Day Type.
Once we have a picture for WHERE the Trend is likely to go we must then focus on Timing. The tool for timing is the actual News Release TIME for potential ENTRY's and the 7 bar zones for potential EXITS.
Prior to the Rally (if one occurs) Professionals will usually spike price against the current trend to catch stops, Enter at wholesale prices and spook the public prior to rallying. This is catch as many people wrong footed as possible so as to make the process of marking the price up easier.
Below is an example of this process and its outcome with a FOMC statement release at 7:00am pacific time.
The steps to look for are as follows
# 1 Prior Days Strength/Weakness - in this example we had Signs of Strength on the Close with a fairly wide spread down bar on high Volume.
15 minute close
4500 Tick Close
# 2 Globex Strength/Weakness - Here we saw that Price bounced after the close, a result and confirmation of strength on the close, BUT NEVER retested those lows of 1310 area.
However Price traded into the 1314-1315 zone on the Pre-Open with Stopping Volume and and Profit Taking bars.
13500 Tick chart
# 3 MARKET BIAS - The market Bais for the day was
Daily Market Bias For Tomorrow = +0.857 Moderate/STRONG Bull.
This takes into account the prior days Strength/Weakness, Exhuastion Divergence and Daily Details and clues and summerizes the information into a general bias, When this is confirmed by the Day Type we have a Very high Probabilty directional bias that is good till the 7 bar in most cases but may resume beyond that time.
# 4 DAY TYPE - The day type interprets the likely outcome of the morning based on the width of the Gap Spread. (for further details see links below)
Often the Day Type will match the Bias and provide powerfull insights. When this occurs the focus on timing the entry becomes the final straw.
In this example the day type was 5.75 Gap Up Signaling an Early Reversal into Trend/Gap Test. We play this by Entering on the 1st extreme of the 15 minute bar, or High Time Frame CYCLE. Here we see the Low was on the 15 minute Daily pivot, Down bar with Block Volume = Strength
This also coincided with the 13500 retest of pre-open Low forming a double bottom
Also the 4500 BB low on High Volume
(Notice the Gap of 5.75pts and the Early Reversal off the lows then PEAKS at or around the 7 bar zone)
These 4 Clues gave us a VERY HIGH probability trade by forecasting the potential future price action of the day.
Understanding that the News release TIME was scheduled for 7:00 we are well positioned to Ride the spike into the 7bar Peaks with entry's Near the Lows of 1314-1315 area.
EXIT's are typically at or around the 7 bar peaks.
In Summery
When Trading the News ie. FOMC Statements etc. Stick with the Current Trend, Look for Strength /Weakness in the background, If the News is at 7:00 USE the GLOBEX Strength/Weakness as the directional base. THE MARKET MAY start to drift against the trend and even spike to catch stops and scare the Public out BEFORE the move in Trend.However be patient and hold on, the spike prior to the 7:00 news may be the perfect entry.
(Notice the Strength in the Globex session(never retesting the lows) and Spike at 1314.25 level scaring the public and
