This short article is a response to Jakob h Jensen who wants to know how I trade news.

In the chart below you see a rectangle, which is highlighting an area of the chart. The highlighted area is the price action of Sterling Dollar immediately after a news release.

Since I don’t know how the news will affect the market, I stand aside until the news has been released.

In the aftermath of the news release, the market often takes the following form:

1. News release cause spike in price
2. Market retrace back towards its pre-news price
3. Market moves once again in the direction of the spike – a secondary move

In the example above the market spikes lower, then retraces, and moves lower yet again.

On the chart below I have circled the initial move in red, and the secondary move in green. I trade the secondary moves.

The entry for secondary moves can take three (or more) obvious forms:

1. A retracement into prior support/resistance
2. A fibonacci retracement
3. A Harmonic retracement

The target is for a new low to be made, or at least a re-test of the low made by the initial spike.

I hope this helps. This example is from earlier on today.

Tom