The last article in our series of Olymp Trade Strategy articles is dedicated to trading on news. This is not new revolutionary form of trading, but it works. Some would call this good-old reliable trading strategy. Every trader out there is seeking after some secret trading strategy that works 100% of the time. That kind of strategy of course doesn’t exist, but trading on news comes really close. Thing is, markets usually act predictably when it comes to various positive or negative news. If for example news comes out that consumption in United States has gone up, probably company stocks from that country will rise. If UK leaves EU, that will most likely push their currency down compared to euro and other currencies. There are many different events that affect prices of different assets available for trading.
Trading on news substantially reduces risk and allows you to make nice profit.
Trading On News – The Essence Of The Strategy
This strategy involves “betting” on both horses, so to speak. That’s why it’s important that you trade with broker like Olymp Trade who enables the function of cancellation of the trade. Olymp Trade enables you to cancel trades once they are already commence. The opportunity to cancel trade you have already opened after you realised that the price went in wrong direction is in the heart of this strategy. Soon you will understand why.
Besides “cancel” option you will need source of important news. You can find that in Olymp Trade Economic Calendar. In this calendar you can see various important news that are published for different countries. To be honest, there aren’t really many news that are suitable for making profit without large risk, but you can expect 6-7 of those per week. Which is enough to make nice profits with just small effort.
Trading On News – Applying Strategy
STEP 1. Take a look at Economic Calendar. Search for most important news – they are indicated by three “bull heads”.
STEP 2. Choose the currency pair that contains the designated currency. In case of Germany or France, or any other EU country choose EUR, for example we would choose pair EURUSD.
STEP 3. One minute before news release open two trades for a period of 10 minutes: first trade can be “UP” and second “DOWN”. This way you are ready if price goes either way.
STEP 4. After the nes has been released you should wait for 2-3 minutes. After that time it will be obvious which way the chart went. If it went up, all you need to do is to cancel “DOWN” trade and vice versa. Once you cancel the trade you will receive percentage of invested amount back. Yes, you don’t get the entire amount invested into trade you are canceling. Bear in mind that sooner you cancel the trade bigger percentage of invested amount is credited back to your balance.
STEP 5. Wait until the remaining trade is closed, and make a profit! You need to ensure that profits from that trade are big enough to cover the losses from cancelled trade. It’s shouldn’t be too hard, but be careful because you might end up losing money. Don’t be sloppy!
Trading On News – Strategy Results
Now let’s do the math behind trading on news strategy. We will assume you start with 100 USD for each of the two transactions.
- So you invest 100 x 2 = 200 USD
- Profit when canceling a losing trade is 40%, so it returns 40 USD (you lost only 60 USD)
- Net profit on the second transaction is 80%: you get 80 USD
- Total: 80-60 = 20 USD
So, without big risk, you can earn 20 USD for 10 minutes. If you invest maximum of 200 USD in each trade then you can expect 40 USD profit in just minutes.
Olymp Trade Recommendations
This strategy works best with currency pairs. Make sure you follow news from UK, Japan, Eurozone, USA and Canada. They affect currency pairs: GBP/USD, USD/JPY, USD/CAD and EUR/USD. However if you are making a trade on EUR/USD currency pair based on news from Eurozone, make sure there aren’t any important news from United States at the same time, because that can make price movement of EUR/USD currency pair quite unpredictable making that trade riskier than it should be.
Trading On News – Conclusion
This strategy is old classic, but it makes perfect sense and in the new world of online trading this strategy is even easier to use. One last recommendation/warning: make sure that return on trade is bigger than 60%, otherwise you will end up trading for 0 USD or even less. Why 60%? Before when you cancel trade you will get back 40% of invested amount – meaning you lose 60%. If winning trade brings you 60% or less return you will be losing money or best case trading for 0 USD profit. Keep that in mind while trading.
There is actually one more recommendation and this goes to all of you newbies: practice, practice, practice. This strategy calls for coordination of activity, cool head and like most trading strategies it’ not for faint hearted. In order to achieve cool head, coordinate trading with news outlets and not to be side tracked by your own emotions you need to practice. Practice make perfect! When speaking of practice, best way to do that is to trade on demo account. This way you will never spend money before you ready. Once you have perfected this trading strategy you can invest money and trade for real. Follow our advice and go over to Olymp Trade website and open your own free demo trading account. Demo account is the same as real account, only that you are not trading for real money and thus can’t make real profits. Read more about that in our article: Olymp Trade Demo Account.
As mentioned in introduction this article is part of our Olymp Trade strategy series of articles. If you like you can read other articles on the links below:
- Ladder Trading
- Trading By The Hour
- Trading With Moving Averages
- Japanese Candlestick Strategy
- Trading Metals
- Parabolic SAR Strategy
- RSI Strategy For Trend Reversal
There is a lot more similar content in our section Trading Advanced. If you still have many “newbie” questions you need to take a look at our Trading FAQ section. If you feel ready you can go over to Olymp Trade site and create you free trading account just by clicking on the button below the text. On the other hand if you are looking for more detailed information about broker itself make sure you read our comprehensive Olymp Trade Broker Review.OPEN FREE TRADING ACCOUNT NOW!