News break outs occur upon the release of major economic announcements. When released, these events can trigger moves of sometimes over 70pips in a few minutes. When a key or major fundamental announcement is to be made, a few minutes to this time we usually notice market moving in very choppy sideways or counter trend. During this time, straddle the news positions them well ahead of the said news event to take advantage of the initial price spike. Truth is, not all news events support this strategy. Before letting you into the news events that support this strategy, let me quickly bring to your awareness that you do not need to spend up to an hour trading this very approach.
You may need to be in the market or trade for just 15minutes and you are out for profit or for a little loss. How this happens is that you need to plan ahead of time the events that require the approach. You do this by running analysis using the economic calendar. The first thing you need to consider is the time of release of the event, followed by the impact of the event. The next is to determine whether the event supports this break out strategy as well as currency pair best suited for the event and the potential it has. To determine these, you may need the resources at forepeacearmy.
The 5 minutes trader report gives a guide on how to this with precision. Having determined the above, the next thing is to come to the platform at about10 or 5 minutes before the release and set up your orders. Doing it some 5 to 3 minutes before the release helps to more than position you for greater market move and also reduce the impact of high volatility that often characterize some of the events. At this time the market is usually quiet.
Technical break out: this kind of break out occurs without any news event in sight. It can happen in the morning during the opening hours as well as in the evening time towards the close of the market. Before the market opening for certain currency pairs and market sessions, the market is usually in a very choppy mode and very quiet too. During this time, the big moves are being planned and you should learn to move along with them. Quite often the market would have defined the direction it wants to go before it becomes quiet attempting to determine where to break out. For EURUSD and GBPUSD, this can happen early morning between 8 and 10 am when there is no news.
How to position you for the big moves: the key strategies that pay
To position you for taking advantage of the big moves during the time, some order types and how to go about placing them need your attention. There are basically 2 main order types for taking advantage of market break outs and these include: the buy stop and sell stop pending order.
The buy stop order is a pending order type that allows you to place a trade at less favorable price level. This is used when you are not certain of the current price level but still speculate that it will rise. However, it is also clear to you that when it riches that certain level you are planning to get into the trade, it may be almost impossible for you to enter due in large to pressure and busy context on the platform and of course most platforms. As a result the trader decides to enter ahead at a less favorable but still considerable profitable price level. To place a buy stop order, you simply consider the current price and then place your buy stop order some pips above the current price. For example, if current price for USDJPY is at 98.800, your buy stop order could be placed at anywhere above this price, say at 98.900 or above. Take profit will be above the entry price which 98.900 0r above and may be some 20pips or more above, while stop loss is set below the entry price.
Sell stop order is simply the opposite of buy stop and is set below the current market price when it speculated that price will fall with force. It is worthy of note to state that when placing any of the order types, consideration should be given to allow some allowance in the profit targets given that entering at a less favorable price higher or above the current price would be eaten into whatever potential the market may possess. This you need to determine in your analysis particularly for news break out. For technical break out, the pivot point and Fibonacci levels will be of great help.
Written by Omotola Sunday