Trading During Scheduled News Events

Last week, The U.S. Department of Labor presented the monthly update on nonfarm payrolls. This would be an example of a scheduled news event. This may come as a surprise to some of you, but did you know that Apiary usually discourages trading during scheduled news events? It’s not necessarily bad to trade during these events, but here is a couple of reasons behind our thinking:

16820153696_285c65bcef_o

  1.     Spreads widen:  The cost of trading in the form of spreads increase during scheduled news events due to the expectation of volatility and risk; liquidity providers will widen the spread to mitigate risk.
  2.     Slippage increases:  It takes time for a quote to be sent from the liquidity provider, received by Alveo, and then have a trade sent back to the liquidity provider. The chances of slippage increase even more with the volatility of a news event.
  3.     Frequent whipsaws:  The initial reaction to a news announcement is not always right–we’ve all been warned about the consequences of first impressions– and markets can change direction many times before the full meaning of the news is digested.
  4.     Lack of liquidity:  Sometimes trades may not trigger due to a lack of liquidity during scheduled news events.
  5.     Hardware issues:  The volatility, along with the pace of data, during news events can put extra strain on your hardware–leading to a slowdown in performance or even malfunctions during a news event.

If you choose to trade during scheduled news events, it’s important for you to recognize the challenges associated with this type of trading and be willing to adjust for the probability of increased risk. Keep these points in mind, and as always…
Happy Trading!

About Shawn Lucas

Shawn Lucas is the founder and fund manager at Apiary Fund. He began his career as a broker for Fidelity and Charles Schwab where he worked the trading desk and processed orders for high net worth investors. An expert in the field of technical and economic analysis of the financial markets, Lucas has since established his reputation as a thought leader and guest speaker for several financial companies including Reuters and TD Ameritrade. He has traveled extensively throughout the world providing lectures, training, consulting, and expert testimony to companies and individuals on the art and science of financial analysis. Lucas has authored sixteen books and studies on the use of technical and economic analysis in stock, option, and futures trading. His simple and methodical approach to the markets has helped thousands of investors better understand and improve their performance and profitability in the financial markets.

Like this Article?

Check out our newsletter for regular forex trading tips and advice!

Or you can visit our website to see what our unique business model is all about ...and how you can participate!

, , , , , , , ,

Comments are closed.