News Events/Reports and How They Correlate with That Days Market Activity

[youngesttrader 10]

Hey guys,

 

Im pretty new face around here at TL but i have a passion for trading more so the E-MINI S&P this previous week i have noticed that since the ISM MFG reports were good the market also shot up a great deal, same follows with the unemployment reports on friday.. good news = big uptrend in the market that day. Basically the question is how many of you guys have kept journals regarding these correlations and what input can you offer me based on your experiences.

 

What days are likely to produce up/down trends based on news releases/reports, What days you should be wary to trade on following a specific report etc.. discuss i think this would be beneficial for a lot of e-mini traders on here.

 

youngest,

 

cheers

[MadMarketScientist 11]

There's a lot of direction we could go in discussing news and trading.

 

Here are a few things that have served me well.

 

If you daytrade the markets will move beyond your target or stop with important news. If you go to the Economic Calendar here on TL at: Economic Calendar any of the High rated reports will likely move the market it is influencing (usually the geo location of that report)

 

And, I always say it's a coin toss with the report. Meaning you have about 50/50 odds it will go for or against you. And, one thing that sometimes makes news trading more difficult is when it goes your way you will almost always get executed exactly at your limit order - rare to get positive slippage. And, if you get stopped out, it is actually somewhat common to get slippage -- and not executed at your stop. So with a 50/50 chance of success, and the fact that you will rarely get positive slippage but can get negative it's not a great coin toss.

 

What I do is if I'm in a position ahead of the news I tend to hold through the news and except my fate. However, if I'm not in a trade and I get a set-up 5 minutes or closer to the report I ignore it - I won't take the trade. And, then I'll take the next signal, or try and get in synch with the one I filtered out no sooner than 2 minutes after news up to 5 minutes after news.

 

I find this to be far safer and less like gambling -- which usually isn't good for your trading account.

 

What I will say though is news can be great - it really is what powers a market up and down so I'm not saying you should avoid it like the plague - just have a very specific and consistent way of handling it.

 

Also, the monthly jobs report -- I actually go flat ahead of that -- example, a month ago I was long on an index and was traveling so didn't get flat. It went against me and I had huge slippage. This time, on Friday I was able to go flat. What happened? It gapped up my way - I would have profited quite significantly. However, I know I did the right thing even though it backfired on me this time - because next time the odds say the reverse will happen. And, I'm not smart enough to guess the numbers these reports will release -- nor do I imagine can anyone.

 

Hope that helps.

 

MMS

[cw30000 10]

Unless you gamble, it is always wise to stay away from news event.most news are done around 10 est, so you still have more than 6 hours to trade.

 

I only trade til 11 or 11:30 and there usually a setup shortly after the news

 

Swyped from my EVO

[youngesttrader 10]

I did not mean neccesarily trading the news report at the time it is released, Was referring more to how the over all trading day unfolds after a certain news event. Has anyone kept a journal of this? as for how the day unfolds after a FOMC or ISM, Unemployment etc.. seems to be alot more probability of a trend day when the news is an extreme good/bad. hope that made it clearer !

[MadMarketScientist 11]

It will be interesting to know if anyone has it to that level of detail.

 

What I can say based upon my observation, not logging every event of course, but over 15 years trading is the extreme misses or beats of the numbers are the ones that lead to big reactions and trends.

 

However, I've been shocked many times to see a big move or gap - reach a quick point of exhaustion and quickly reverse.

 

I find that numbers that come in-line or just above/below tend to have a short lived reaction.

 

I have my doubts that there is any really reliable play that can be made strictly based upon the level of the hit/miss of these key reports.

 

Just my observation.

 

MMS

[EminiTradingCoach 10]

I totally agree. Dont forget that it's not always what the news is, but how people interpret the news. Good news to you and I may not be so for the market.

 

What would be your strategy for trading the news? A bracket around the price? I've seen on multiple occasions where a trader was filled on both bracketed orders in a split second taking a big loss.

 

I think there is a reason you see your DOM or Trading Think out prior to news releases. The pros are telling you to get out and trade the reaction.

[cuttshot 11]

I agree with the earlier comments. Trading around news can be very difficult. I also like to sit out a couple minutes before the release and thet get back in a few minutes after. Often times you will see an action-reaction-action move. You will get an initial move right at the release followed by a reaction in the opposite direction then finally a third move back in the direction of the original move.

 

Even if you find a way to get an edge around news you need to keep in mind the possible slippage. You can really get some nasty fills trading around news.

[Tradewinds 12]

Apr 28, 2001 The U.S. news at 8:30 am this morning was bad. Where was the bottom of the SP e-mini today? At 8:30am. Wait! Hold on! The news was BAD, and then the ES went up all day? Yes, that's right. The second the bad news at 8:30 came out, the es bottomed and started going up. Why? Probably in anticipation of the 10am news. And the 10am news was unexpectedly good. Pending home sales were way up. Does somebody know something before the official new release? Who knows? The reality is, that the ES seems to somehow (magically?) move towards a price that reflects the real news, way before it's released.

[Qiman 10]

I don't keep a journal of how news moves the markets, because I rarely see a usable pattern, it keeps changing over time.

 

Expectations rule, they set the table. News so often has the exact opposite impact than what "logic" would deem an appropriate response by the crowd. Just like a lot of other things in the market, it can be rather random and hard to predict.

 

Occasionally real money can be made, if one waits until clarity appears after the frenzy.

 

Wednesday CL dipped with the bad news of a much larger than expected inventory increase in crude oil, and then went up about 2 dollars within an hour and 15 minutes. Not exceptionally predictable or logical, but for some was very profitable!

[MadMarketScientist 11]

In the information age, I think "Buy the Rumor Sell the News" holds more true than ever, markets are so efficient the majority of news is already priced into the market. Personally I value looking at big trends and going for the ride.

[SIUYA 11]

its a combination of the overriding trend - bull markets tend to ignore bad news

a combination of the current context and mood - is the market nervous, bouyant, bearish, bullish

a combination of expectation and then the magnitude of that the potential influence of those expectations and the possible move - eg; bad news might cause a market to fall for a day, and then rally as its in an uptrend

the fact that often news is actually historically reported

the fact that news is often based on opinion and not fact

this then leads to incorrect assumptions

the fact that news is often irrelevant, its not news, its a small piece of the jigsaw.......

This is often why I dont listen to the news