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I understand the allure of trading these wild news events. I used to dream of it myself. It sounds like easy money. Just trade for short periods of time. Make a great return on your investment. It sounds so good!

Then the reality of the issue settles in. Most brokers widen the spread during these times. For example, I know one broker who widened the spread to around 200 pips. Often times it's increased to 50 pips. The "guaranteed" 2 pips spread doesn't exist during times of high volatility.

With spreads like that you're guaranteed to lose. You simply can't trade with a spread like that, and the brokers know it. That's why they have the spread set up like that.

But just for the sake of argument, let's say you found a broker who would let you trade with a regular sized spread during the non-farm payroll release time.

The most common way to trade the news is to straddle it. In other words you place a buy and a sell in the market. Whichever way the market goes first, it will touch that order first. Then the other order is removed from the market, and you work to make profit on your open order.

Well, the market will often whiplash. You may think you guessed wrong and exit the trade at a loss. Then the market will turn and go in the direction you were trading. Or, you'll hang on (thinking that the market is just faking), but it's not. And you'll end up with a huge loss.

In truth, news trading is just like playing craps. It's gambling.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide

posted by gektal  # 4:11 PM 1 comments