News Trading Strategies
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J U N E
2 0 0 6
News Trading Strategies By Scott Owens
The unique FX Engines News Toolkit offers unprecedented access to advanced trading and investing strategies. As detailed in the Trade the News report, this method is completely new and thus requires a fresh approach. Armed with your news trading toolkit from FX Engines and some fundamental strategies, investors and traders of all shapes and sizes can now take advantage of these dynamic price moves. ANALYSIS • • • • • •
Preparing to trade the news Position sizing strategies Entry strategies Exit strategies Trade post mortems Signal definitions
ACTION • • FX Engines, Inc. The world leader in automated forex trading. For more information and free trial, visit: www.fxengines.com
Trade the news with FX Engines! Learn more about FX Engines’ News Trading Offerings
RELATED MATERIAL
Test-drive FX Engines for free online at www.fxengines.com.
ABOUT THIS REPORT
The Forex Report is a periodic publication that investigates strategies for superior trading performance in the foreign exchange markets. These reports utilize advanced statistical and econometric modeling techniques to create new insight into the trading strategy of the average trader. This report, News Trading Strategies, is a general report intended for all audiences, including those new to the forex market. To learn more about The Forex Report or to register for delivery of all future reports by email please visit www.fxengines.com.
The Forex Report
June 2006
ANALYSIS Trading the news demands a new approach and more importantly, new tools. FX Engines has developed a new Trade the News Toolkit specifically designed to take advantage of these unique trades. This report will arm traders with the fundamentals needed to attack these price moves successfully. PREPARATION All news events are not created equal. To determine which events have the most potential for profit, we created Event Reports. Each Event Report provides a cumulative data analysis for every event trade since January 2005. Using the data in Event Reports can help to classify trades for profit potential, reversal potential, and the probability that the trade will result in a ‘quality’ experience, i.e. one where you can make money. Event Reports are located at the FX Engines site within your user account under the Alerts tab. These reports are updated shortly after a trade concludes and are available to you free of charge. We strongly advise that you employ these reports in your preparation to trade the news, in engine selection, exit selection, and position sizing. POSITION SIZING Most traders think of how much they will trade at a given time as a function of how much they can trade given their account balance. Thus, to a trader with a $10,000 mini account who can trade 200 contracts, 10 contracts doesn’t seem very large. But it’s not the percentage of traded contracts to possible contracts that’s important. Position size must be based on the amount of equity being risked each trade. Traditionally, this is 1% of capital per trade. That amount can fluctuate higher or lower depending on your experience and trading goals. In the example of a trader with $10,000, 1% is $100. That trader can risk $100 per trade and still be within commonly accepted risk ranges. How then are position sizes calculated? If the trader’s system risks 50 pips per trade (that is, the stop is 50 pips in a mini account), then each contract traded has the potential to result in a $50 loss. Thus, the position size
Page 1 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
given this system is 2 contracts: 50 pips * $1 per pip * 2 contracts = $100 potential loss. Here we can immediately see one of the chief benefits of trading the news. News trades are based on price spikes, and you’d never use a large stop with a price spike. If a 10 pip stop was used rather than a 50 pip stop (as we recommend), the position size grows to 10 contracts: 10 pips * $1 per pip * 10 contracts = $100 potential loss. A news trade can employ leverage to a greater extent than most trades because of the tight stops used. In these examples, a 50-pip gain for the trader with the 50 pip stop returns 1%, while the same gain for the trader with the 10 pip stop returns 5%. Both risked the same $100. We advise traders to use this fixed fractional approach, with 1% as the conservative choice, 2.5% as the moderate choice, and 5% as the aggressive choice. The position size should be set at the beginning of the month and remain fixed throughout. Finally, traders may wish to trade some events aggressively and others conservatively. In any case, be sure to use a position sizing method based on potential loss to avoid serious account drawdowns. Live account holders can consult Engines > Money Manager to view their total risk exposure. TRADE ENTRY FX Engines offers two means of trading the news: engines and orders. If you have little experience trading or if you prefer a fully automated solution, choose our engines. Each event is listed with three engine options: conservative, moderate, and aggressive. The signals for entry and exit are listed with each engine, as are its performance results. Bear in mind that these engines are not managed – they are ready-made systems you can subscribe to, and every time a tradeable event occurs your subscribed engines will trade on your behalf. If you select engines as your means of entry, you need only concern yourself with position sizing, but you also have control over engine exit. Each time a trade occurs, you will receive an email immediately (you can also plan to watch the trades in person). Once a trade is live its exit system will be in control, but at any time you can go to Orders > Edit Active Trades to change those default exits to something else, if you prefer. If you wish to trade using the tools provided in Orders, you will need to create and schedule trades. To begin, go to Orders and select the currency
Page 2 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
pair, trade direction, signal, and timeout. For news trades we recommend placing orders long and short using one of the three news signals provided, with a 4 minute timeout. If you create orders long and short, the system will immediately start checking for the right kind of price spike on both sides of the trade. When the event occurs, normal price action will send a spike in one direction, and your engine will trade in that direction. The order you created in the opposite direction will expire 4 minutes later. Here is the form used to create an order entry:
Inputting a name is optional. Select the pair, direction, and click the circle next to Signal, then select from the signals we provide. Each of these signals is fine tuned to trade the news, and each works exactly as you would expect: the instant spike gets you in at the very beginning of the event, the normal spike waits to see the spike get somewhat established, and the reserved spike waits to see the move get underway. Once you’ve chosen the signal, enter the number of minutes to wait for entry. We recommend 4, since that will keep you trading only at the beginning of the event, not in the moments after it has already begun to solidify its move. TRADE EXIT When creating a new trade, an initial exit must be specified. Please note that with FX Engines, all exits are maintained through us, not the dealer. When the exit price is hit we instantly transmit the order to the dealer as a market order. Exits can be simple or highly complex. The first three options available to you are somewhat simple:
Fixed/Limit Combo: You specify how many pips below your open (the stop) or above your open (the limit) you want to have as exit
Page 3 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
points. For instance, if you choose 10 for the fixed stop and 15 for the limit exit, your exits will activate when you hit -10 OR +15. Nothing else will cause your trade to exit.
Trail/Limit Combo: This is identical to the Fixed/Limit except your downside stop moves up as your position improves. For instance, if you had a 10 pip trailing stop with a 15 pip limit exit, your stop would start at -10, but when your position went to +4 your stop would move to -6. When your position moved to +8 the stop would be -2. When the position hit +15 you would exit immediately.
Trail Only: This works exactly like the example above – your stop moves up as your profit increases. Simple trailing exits can be very effective exit strategies, since they allow the trade to ‘breathe’ as profit increases.
The final exit option is Contextual Exits. These are more complex exit systems that we have premade for you to use. You can see a description of each of these exits at the end of this report. Once your trade is active in the market, you can change the exit strategy you used at any time by going to Orders > Edit Active Trades. Any new strategy will completely replace the old strategy, and you can edit exits as frequently as you wish during a trade.
Page 4 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
SCHEDULING TRADES The final step for creating a news trade is to schedule it for activation. By default, all trades execute immediately. However, news trades should ALWAYS be scheduled to execute 1 minute prior to the event. For example, if Friday’s Nonfarm Payrolls report is issued at 8:30 AM, schedule your trade to enter the market Friday at 8:29 AM – no sooner or later. That way, your engine will be evaluating the market when the release is issued at 8:30, and you will be in perfect position to trade the event.
BLENDING TRADES When you are getting started, we recommend using a single strategy for each news event so that you can get a feel for what’s happening each time. However, once you have a bit of practice under your belt you can start to blend your trades using multiple entries and exits. If you want to trade 10 contracts, you can always create 1 position with 10 contracts and hope to make a solid trade. However, blending trades – using a variety of entry and exit strategies – allows you to diversify all trades, and usually average to the upside. It takes away the need for one strategy to be perfect, and removes the temptation to exit a trade prematurely. For example, if your position size is 6 contract, we recommend 6 different positions, shown below:
Page 5 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
You create 12 orders in total: 6 long and 6 short. Your orders use 2 entry strategies with 3 exit strategies, as follows: Order 1 2 3 4 5 6
Entry Signal FX Engines News Spike Instant Entry FX Engines News Spike Instant Entry FX Engines News Spike Instant Entry FX Engines News Spike Reserved Entry FX Engines News Spike Reserved Entry FX Engines News Spike Reserved Entry
Exit Strategy Contextual Exit: London Contextual Exit: Paris Contextual Exit: Cairo Contextual Exit: London Contextual Exit: Paris Contextual Exit: Cairo
Note: These 6 orders would be duplicated long and short, resulting in 12 total orders.
Of these 12, only 6 would potentially trade if the timeout was used correctly. The 6 trades would all target different entries and exits, resulting in an averaged out, blended trade. The automation of FX Engines makes this kind of trade possible – it could never be done manually! Over time, you will become adept at setting trades correctly for each event, and blending will become a major part of your trading strategy. TRADE REVIEW At the conclusion of every trade we recommend that you maintain a trade log, with notes for each trade that help to shape your future strategies. Not all news trades will win. However, one of the best elements of news trades is their small losses. If you size your positions carefully, avoid excess aggression, and stay in the market even after a couple of losses, you will hit a trade large enough to easily wipe away many losses. In the final analysis, the nature of news trades means that you don’t even have to succeed in 50% of your trades. The FX Engines platform and data analysis combined with your own efforts can yield substantial returns using this system. Best wishes in your future trades!
Page 6 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
SIGNAL DEFINITIONS News Spike Signals FX Engines’ entry signals for trading the news are proprietary signals that cannot be disclosed. However, we can give you some rough outline of how they work:
News Spike Instant – Entry will occur within 5-15 pips of event open, if a spike occurs.
News Spike Normal – Entry will occur within 10-20 pips of event open, if a spike occurs.
News Spike Reserved – Entry will occur within 15-25 pips of event open, if a spike occurs.
Please take note: our news spike signals are contextual in nature, and will not always enter the same number of pips away from the opening price. Also, the values above do not take into account gaps in price at the open of trades, which can be double-digits for some events. Contextual Exits Definitions for all available contextual exits are shown in Events > Trade Ideas > Guide to Contextual Exits. Each Contextual Exit comes with a name followed by a number, i.e. London 08. The name has no importance whatsoever – it was simply a way of giving each exit a name. The number is the downside protection for each exit – the maximum loss. So every ‘London’ engine will use the same exit system, except the initial stop will be the value at the end of the name. Use this value to set your position size. To learn more about how exits work, please read this description of CAIRO 12: CAIRO 12 uses the CAIRO exit with a 12 pip stop. Initially and until you reach +9, your stop will be at -12. At +10 until +19, your stop will change to a trailing stop of 20. At +20 until +29, your stop will change to a trailing stop of 18. At +30 until +39, your stop will change to a trailing stop of 16. At +40 until +49, your stop will change to a trailing stop of 14. At +50 until +74, your stop will change to a trailing stop of 12. At +75 and beyond, your stop will change to a trailing stop of 6.
Page 7 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
ACTION Trade the news with FX Engines! The tools, data, and technology you need to trade FX strategically – conservatively using leverage – are now available to you. YOUR TRADE THE NEWS TOOLKIT FX Engines is the only trading platform built around trading the news. Our feature set and internal expertise can arm you for trading success, and we make it easy with our no-worry fee structure - no fees! You pay only the standard bid-ask spread and nothing extra, and with your live account you have unlimited access to all of the information and expertise we have to offer on your behalf:
Trading the news presents an incredible opportunity but requires a unique, news-specific toolkit. At FX Engines, it starts with order execution in milliseconds, faster than any manual execution. Our instant execution of orders gives traders the edge they need to trade the news successfully.
Along with our execution speed, our automation system stands at the forefront of the tools needed to trade the news effectively. Very simply, price action from news usually happens too quickly for a human to see, process, and act upon before the market has passed. FX Engines enables instant decision making to go with instant execution, fueling your news strategies.
Even if you don't have experience placing orders for trades, you can still trade the news. FX Engines offers a wide variety of ready-made trading systems that put you in the market at the right time and allow you to control when to exit. You can set specific profit goals or let a trailing stop collect profits as the position improves - all for no extra cost beyond the bid/ask spread.
Page 8 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
For a truly custom approach, use FX Engines' custom news signals to create your own orders with custom exits, timing and more. Our signals were designed to sense news related price action and enter at one of a handful of predetermined levels. You simply select the signal, specify the exit, and schedule the trade.
We've studied the price action of news events in great detail, and we make that wealth of information available to you. Each week before a news release we'll highlight that data in an Event Report, with specific historical price patterns and tips for what to expect - a resource you won't get anywhere else.
FX Engines offers a free, unlimited trial of its state-of-the-art trading platform. Simply go to www.fxengines.com/register, complete the form, and you can begin demo trading immediately. You’ll have the same access to the weekly and daily Event Reports that live traders get, and you’ll be able to demo trade for free as long as you wish. When you’re ready to go live, go to www.fxengines.com/newaccounts to create a new trading account with our dealer. If you have any questions along the way, log in to the site and click support to send us a message. Best wishes in all of your trades!
Page 9 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
FX ENGINES OFFERINGS FX Engines offers a complete news trading platform that you can try for free. You can trade the news on your own by creating orders or trading our ready-made engines. Additionally, each event has a detailed Event Report to arm you with the data needed to trade each event strategically. For those of you who wish to take advantage of trading the news but prefer a managed solution, check out the FX Investor offering from FX Engines. We offer a wide array of fully managed news trading solutions with real time updates of account activity. Email [email protected] for more information.
MORE INFORMATION For more information about The Forex Report, visit www.fxengines.com or email [email protected]. The Forex Report is available for distribution on third party websites as a co-branded offering. Contact us for more information.
THE FOREX REPORT Analyzing statistical, econometric, and behavioral trends in the foreign exchange markets for insight into the optimal use of the FX Engines automated trading platform. The information contained in this report is represented without warranty or any statement of its veracity. The contents of this report are intended to stimulate thinking on issues related to trading forex. This report does not suggest any particular action that could be utilized in live trading for profit or loss. I can put it no better than Hoffer, who deferred to Montaigne: “All I say is by way of discourse, and nothing by way of advice. I should not speak so boldly if it were my due to be believed.”
Page 10 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
2 0 0 6
News Trading Strategies By Scott Owens
The unique FX Engines News Toolkit offers unprecedented access to advanced trading and investing strategies. As detailed in the Trade the News report, this method is completely new and thus requires a fresh approach. Armed with your news trading toolkit from FX Engines and some fundamental strategies, investors and traders of all shapes and sizes can now take advantage of these dynamic price moves. ANALYSIS • • • • • •
Preparing to trade the news Position sizing strategies Entry strategies Exit strategies Trade post mortems Signal definitions
ACTION • • FX Engines, Inc. The world leader in automated forex trading. For more information and free trial, visit: www.fxengines.com
Trade the news with FX Engines! Learn more about FX Engines’ News Trading Offerings
RELATED MATERIAL
Test-drive FX Engines for free online at www.fxengines.com.
ABOUT THIS REPORT
The Forex Report is a periodic publication that investigates strategies for superior trading performance in the foreign exchange markets. These reports utilize advanced statistical and econometric modeling techniques to create new insight into the trading strategy of the average trader. This report, News Trading Strategies, is a general report intended for all audiences, including those new to the forex market. To learn more about The Forex Report or to register for delivery of all future reports by email please visit www.fxengines.com.
The Forex Report
June 2006
ANALYSIS Trading the news demands a new approach and more importantly, new tools. FX Engines has developed a new Trade the News Toolkit specifically designed to take advantage of these unique trades. This report will arm traders with the fundamentals needed to attack these price moves successfully. PREPARATION All news events are not created equal. To determine which events have the most potential for profit, we created Event Reports. Each Event Report provides a cumulative data analysis for every event trade since January 2005. Using the data in Event Reports can help to classify trades for profit potential, reversal potential, and the probability that the trade will result in a ‘quality’ experience, i.e. one where you can make money. Event Reports are located at the FX Engines site within your user account under the Alerts tab. These reports are updated shortly after a trade concludes and are available to you free of charge. We strongly advise that you employ these reports in your preparation to trade the news, in engine selection, exit selection, and position sizing. POSITION SIZING Most traders think of how much they will trade at a given time as a function of how much they can trade given their account balance. Thus, to a trader with a $10,000 mini account who can trade 200 contracts, 10 contracts doesn’t seem very large. But it’s not the percentage of traded contracts to possible contracts that’s important. Position size must be based on the amount of equity being risked each trade. Traditionally, this is 1% of capital per trade. That amount can fluctuate higher or lower depending on your experience and trading goals. In the example of a trader with $10,000, 1% is $100. That trader can risk $100 per trade and still be within commonly accepted risk ranges. How then are position sizes calculated? If the trader’s system risks 50 pips per trade (that is, the stop is 50 pips in a mini account), then each contract traded has the potential to result in a $50 loss. Thus, the position size
Page 1 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
given this system is 2 contracts: 50 pips * $1 per pip * 2 contracts = $100 potential loss. Here we can immediately see one of the chief benefits of trading the news. News trades are based on price spikes, and you’d never use a large stop with a price spike. If a 10 pip stop was used rather than a 50 pip stop (as we recommend), the position size grows to 10 contracts: 10 pips * $1 per pip * 10 contracts = $100 potential loss. A news trade can employ leverage to a greater extent than most trades because of the tight stops used. In these examples, a 50-pip gain for the trader with the 50 pip stop returns 1%, while the same gain for the trader with the 10 pip stop returns 5%. Both risked the same $100. We advise traders to use this fixed fractional approach, with 1% as the conservative choice, 2.5% as the moderate choice, and 5% as the aggressive choice. The position size should be set at the beginning of the month and remain fixed throughout. Finally, traders may wish to trade some events aggressively and others conservatively. In any case, be sure to use a position sizing method based on potential loss to avoid serious account drawdowns. Live account holders can consult Engines > Money Manager to view their total risk exposure. TRADE ENTRY FX Engines offers two means of trading the news: engines and orders. If you have little experience trading or if you prefer a fully automated solution, choose our engines. Each event is listed with three engine options: conservative, moderate, and aggressive. The signals for entry and exit are listed with each engine, as are its performance results. Bear in mind that these engines are not managed – they are ready-made systems you can subscribe to, and every time a tradeable event occurs your subscribed engines will trade on your behalf. If you select engines as your means of entry, you need only concern yourself with position sizing, but you also have control over engine exit. Each time a trade occurs, you will receive an email immediately (you can also plan to watch the trades in person). Once a trade is live its exit system will be in control, but at any time you can go to Orders > Edit Active Trades to change those default exits to something else, if you prefer. If you wish to trade using the tools provided in Orders, you will need to create and schedule trades. To begin, go to Orders and select the currency
Page 2 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
pair, trade direction, signal, and timeout. For news trades we recommend placing orders long and short using one of the three news signals provided, with a 4 minute timeout. If you create orders long and short, the system will immediately start checking for the right kind of price spike on both sides of the trade. When the event occurs, normal price action will send a spike in one direction, and your engine will trade in that direction. The order you created in the opposite direction will expire 4 minutes later. Here is the form used to create an order entry:
Inputting a name is optional. Select the pair, direction, and click the circle next to Signal, then select from the signals we provide. Each of these signals is fine tuned to trade the news, and each works exactly as you would expect: the instant spike gets you in at the very beginning of the event, the normal spike waits to see the spike get somewhat established, and the reserved spike waits to see the move get underway. Once you’ve chosen the signal, enter the number of minutes to wait for entry. We recommend 4, since that will keep you trading only at the beginning of the event, not in the moments after it has already begun to solidify its move. TRADE EXIT When creating a new trade, an initial exit must be specified. Please note that with FX Engines, all exits are maintained through us, not the dealer. When the exit price is hit we instantly transmit the order to the dealer as a market order. Exits can be simple or highly complex. The first three options available to you are somewhat simple:
Fixed/Limit Combo: You specify how many pips below your open (the stop) or above your open (the limit) you want to have as exit
Page 3 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
points. For instance, if you choose 10 for the fixed stop and 15 for the limit exit, your exits will activate when you hit -10 OR +15. Nothing else will cause your trade to exit.
Trail/Limit Combo: This is identical to the Fixed/Limit except your downside stop moves up as your position improves. For instance, if you had a 10 pip trailing stop with a 15 pip limit exit, your stop would start at -10, but when your position went to +4 your stop would move to -6. When your position moved to +8 the stop would be -2. When the position hit +15 you would exit immediately.
Trail Only: This works exactly like the example above – your stop moves up as your profit increases. Simple trailing exits can be very effective exit strategies, since they allow the trade to ‘breathe’ as profit increases.
The final exit option is Contextual Exits. These are more complex exit systems that we have premade for you to use. You can see a description of each of these exits at the end of this report. Once your trade is active in the market, you can change the exit strategy you used at any time by going to Orders > Edit Active Trades. Any new strategy will completely replace the old strategy, and you can edit exits as frequently as you wish during a trade.
Page 4 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
SCHEDULING TRADES The final step for creating a news trade is to schedule it for activation. By default, all trades execute immediately. However, news trades should ALWAYS be scheduled to execute 1 minute prior to the event. For example, if Friday’s Nonfarm Payrolls report is issued at 8:30 AM, schedule your trade to enter the market Friday at 8:29 AM – no sooner or later. That way, your engine will be evaluating the market when the release is issued at 8:30, and you will be in perfect position to trade the event.
BLENDING TRADES When you are getting started, we recommend using a single strategy for each news event so that you can get a feel for what’s happening each time. However, once you have a bit of practice under your belt you can start to blend your trades using multiple entries and exits. If you want to trade 10 contracts, you can always create 1 position with 10 contracts and hope to make a solid trade. However, blending trades – using a variety of entry and exit strategies – allows you to diversify all trades, and usually average to the upside. It takes away the need for one strategy to be perfect, and removes the temptation to exit a trade prematurely. For example, if your position size is 6 contract, we recommend 6 different positions, shown below:
Page 5 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
You create 12 orders in total: 6 long and 6 short. Your orders use 2 entry strategies with 3 exit strategies, as follows: Order 1 2 3 4 5 6
Entry Signal FX Engines News Spike Instant Entry FX Engines News Spike Instant Entry FX Engines News Spike Instant Entry FX Engines News Spike Reserved Entry FX Engines News Spike Reserved Entry FX Engines News Spike Reserved Entry
Exit Strategy Contextual Exit: London Contextual Exit: Paris Contextual Exit: Cairo Contextual Exit: London Contextual Exit: Paris Contextual Exit: Cairo
Note: These 6 orders would be duplicated long and short, resulting in 12 total orders.
Of these 12, only 6 would potentially trade if the timeout was used correctly. The 6 trades would all target different entries and exits, resulting in an averaged out, blended trade. The automation of FX Engines makes this kind of trade possible – it could never be done manually! Over time, you will become adept at setting trades correctly for each event, and blending will become a major part of your trading strategy. TRADE REVIEW At the conclusion of every trade we recommend that you maintain a trade log, with notes for each trade that help to shape your future strategies. Not all news trades will win. However, one of the best elements of news trades is their small losses. If you size your positions carefully, avoid excess aggression, and stay in the market even after a couple of losses, you will hit a trade large enough to easily wipe away many losses. In the final analysis, the nature of news trades means that you don’t even have to succeed in 50% of your trades. The FX Engines platform and data analysis combined with your own efforts can yield substantial returns using this system. Best wishes in your future trades!
Page 6 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
SIGNAL DEFINITIONS News Spike Signals FX Engines’ entry signals for trading the news are proprietary signals that cannot be disclosed. However, we can give you some rough outline of how they work:
News Spike Instant – Entry will occur within 5-15 pips of event open, if a spike occurs.
News Spike Normal – Entry will occur within 10-20 pips of event open, if a spike occurs.
News Spike Reserved – Entry will occur within 15-25 pips of event open, if a spike occurs.
Please take note: our news spike signals are contextual in nature, and will not always enter the same number of pips away from the opening price. Also, the values above do not take into account gaps in price at the open of trades, which can be double-digits for some events. Contextual Exits Definitions for all available contextual exits are shown in Events > Trade Ideas > Guide to Contextual Exits. Each Contextual Exit comes with a name followed by a number, i.e. London 08. The name has no importance whatsoever – it was simply a way of giving each exit a name. The number is the downside protection for each exit – the maximum loss. So every ‘London’ engine will use the same exit system, except the initial stop will be the value at the end of the name. Use this value to set your position size. To learn more about how exits work, please read this description of CAIRO 12: CAIRO 12 uses the CAIRO exit with a 12 pip stop. Initially and until you reach +9, your stop will be at -12. At +10 until +19, your stop will change to a trailing stop of 20. At +20 until +29, your stop will change to a trailing stop of 18. At +30 until +39, your stop will change to a trailing stop of 16. At +40 until +49, your stop will change to a trailing stop of 14. At +50 until +74, your stop will change to a trailing stop of 12. At +75 and beyond, your stop will change to a trailing stop of 6.
Page 7 of 10 © 2006. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free trial visit www.fxengines.com.
The Forex Report
June 2006
ACTION Trade the news with FX Engines! The tools, data, and technology you need to trade FX strategically – conservatively using leverage – are now available to you. YOUR TRADE THE NEWS TOOLKIT FX Engines is the only trading platform built around trading the news. Our feature set and internal expertise can arm you for trading success, and we make it easy with our no-worry fee structure - no fees! You pay only the standard bid-ask spread and nothing extra, and with your live account you have unlimited access to all of the information and expertise we have to offer on your behalf:
Trading the news presents an incredible opportunity but requires a unique, news-specific toolkit. At FX Engines, it starts with order execution in milliseconds, faster than any manual execution. Our instant execution of orders gives traders the edge they need to trade the news successfully.
Along with our execution speed, our automation system stands at the forefront of the tools needed to trade the news effectively. Very simply, price action from news usually happens too quickly for a human to see, process, and act upon before the market has passed. FX Engines enables instant decision making to go with instant execution, fueling your news strategies.
Even if you don't have experience placing orders for trades, you can still trade the news. FX Engines offers a wide variety of ready-made trading systems that put you in the market at the right time and allow you to control when to exit. You can set specific profit goals or let a trailing stop collect profits as the position improves - all for no extra cost beyond the bid/ask spread.
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The Forex Report
June 2006
For a truly custom approach, use FX Engines' custom news signals to create your own orders with custom exits, timing and more. Our signals were designed to sense news related price action and enter at one of a handful of predetermined levels. You simply select the signal, specify the exit, and schedule the trade.
We've studied the price action of news events in great detail, and we make that wealth of information available to you. Each week before a news release we'll highlight that data in an Event Report, with specific historical price patterns and tips for what to expect - a resource you won't get anywhere else.
FX Engines offers a free, unlimited trial of its state-of-the-art trading platform. Simply go to www.fxengines.com/register, complete the form, and you can begin demo trading immediately. You’ll have the same access to the weekly and daily Event Reports that live traders get, and you’ll be able to demo trade for free as long as you wish. When you’re ready to go live, go to www.fxengines.com/newaccounts to create a new trading account with our dealer. If you have any questions along the way, log in to the site and click support to send us a message. Best wishes in all of your trades!
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The Forex Report
June 2006
FX ENGINES OFFERINGS FX Engines offers a complete news trading platform that you can try for free. You can trade the news on your own by creating orders or trading our ready-made engines. Additionally, each event has a detailed Event Report to arm you with the data needed to trade each event strategically. For those of you who wish to take advantage of trading the news but prefer a managed solution, check out the FX Investor offering from FX Engines. We offer a wide array of fully managed news trading solutions with real time updates of account activity. Email [email protected] for more information.
MORE INFORMATION For more information about The Forex Report, visit www.fxengines.com or email [email protected]. The Forex Report is available for distribution on third party websites as a co-branded offering. Contact us for more information.
THE FOREX REPORT Analyzing statistical, econometric, and behavioral trends in the foreign exchange markets for insight into the optimal use of the FX Engines automated trading platform. The information contained in this report is represented without warranty or any statement of its veracity. The contents of this report are intended to stimulate thinking on issues related to trading forex. This report does not suggest any particular action that could be utilized in live trading for profit or loss. I can put it no better than Hoffer, who deferred to Montaigne: “All I say is by way of discourse, and nothing by way of advice. I should not speak so boldly if it were my due to be believed.”
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