Traders need to learn how to navigate volatile markets by implementing a solid trading plan and adopting sound risk management. This article provides effective tools for traders looking to trade post release.
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Post-release trading strategies
1. Trend following strategy
This strategy involves the use of multiple time frames[1], as well as, well-defined levels of support and resistance that come into play after a news release.
Traders can adopt this strategy when the current market price is approaching a well-defined level of support or resistance but isn’t quite there yet. The volatility after the news release has the potential to push the market toward the trendline. If price respects the trendline, traders can look to trade in the direction of the trend and trade the potential bounce.
The following 4 points are of assistance for this type of trade:
- Determine trend direction on a daily chart
- Draw support and resistance lines
- Select a forex time frame[2] anywhere from 1 – 4 hours
- Buy near support in uptrend and sell near resistance in downtrend
Keep in mind that news releases have the potential to break through longstanding levels of support and resistance which underscores the importance of using tight stops[3] when pursuing this strategy.
2. Dual spike breakout strategy
This strategy involves waiting for market volatility to reveal a range before trading a break of that range and makes use of a five-minute chart. For illustrative purposes this section incorporates the US Non-Farm Payroll (NFP[4]) release as this often has the greatest potential to move the market.
After the NFP release, wait 15-minutes for three five-minute candles to close. Take note of the highest price and the lowest
