“Scalping on news” strategy. Is this trading option possible?
News and publication of economic statistics are comparable to a car engine, which, despite the presence of many other components and mechanisms, is the most important element that forces the market to move.
Unfortunately, many traders do not want to realize the fact that news and economic statistics are the very source data.
They are the ones that can be studied by investors and large investment companies, whose transactions actually set the market in motion.
The “News Scalping” strategy is a trading tactic that is designed to capture a strong price impulse that occurs when news is published.
The “News Scalping” strategy is a multi-currency trading tactic that is not tied to either currency pairs or time frames, and trading itself occurs only on those instruments for which key statistics are published.
Preparing a strategy. Installing a news indicator
To trade using the “Scalping on News” strategy, we need two data sources. The first is the economic calendar, which publishes news announcements, previous indicators, and analysts’ forecasts.
It is with the help of this calendar that you can select strong and average news according to the degree of influence on the market, and also get acquainted with detailed information on them in case you do not know what the data is based on and how they can influence the market.
The second source of data is a special news indicator, which directly on the chart displays a list of news and the time when they come out. The indicator itself serves for the convenience of the trader and allows him not to miss the release of important economic statistics.
To install the strategy, you will need to download the custom indicator at the end of the article, and then install it in the MT4 trading terminal. To do this, go to the file menu of your trading terminal and launch the platform data directory.
Then, in the list of folders that appears, find the folder called Indicators and drop the news indicator downloaded at the end of the article into it, and also find the folder called Template and drop the “Scalping on News” strategy template into it.
In order for the trading terminal to see the installed strategy files, it must be restarted or updated in the navigator panel.
After updating the platform, select any chart with major currencies and launch the “Scalping on News” strategy template on it. Ultimately you will see a graph like this:
Trading algorithm using the “Scalping on news” strategy
As already noted, for trading you will need two economic calendars, namely the first from the trading terminal, and the second from any broker’s website or investing website.
The principle and algorithm of work is to compare the released data with past indicators, as well as with analysts’ forecasts.
So, if the published data is better than the predicted and previous ones - a bullish signal! If the data came out worse than the previous ones and worse than the forecast, the signal is bearish.
When scalping, it is very important to open a trade as quickly as possible after the news is published and lock in the profit from the movement, which will last a few minutes.
It is also worth understanding that strong movements are caused only by strong news, so economic calendar you should choose news with two or three bulls.
It is very important to understand that data is not published for a currency pair, but for an individual country, whose monetary unit is an integral part of the currency pair. As an example, consider the positive data on the Euro.
So, if the data on the euro is positive, then currency pair Euro/Dollar will go up, and if negative, down. At the same time, positive data on the dollar will send the chart of the currency pair down, and negative data up.
The logic of this influence is very simple, namely, if your currency pair is Euro/Dollar, this means that you buy euros for dollars, thus, the stronger and more expensive the dollar, the less we will have to pay for the euro and vice versa.
Nuances when scalping on news. Is this trading option possible in practice?
The market almost always reacts to the publication of key statistics, and the scalper’s task when trading using a strategy is to open a deal during the most active phase of price movement.
However, in practice, many traders may experience requotes due to the strong rapid change in asking price.
Also, many brokers limit the minimum time for holding a transaction to several minutes in the regulations, which is unacceptable when scalping on news.
That is why, in order to put the strategy into practice, you need a broker with ECN accounts and direct access to the interbank market, which will ensure high speed of order execution.
In conclusion, it is worth noting that scalping on news is an extremely profitable area, but it is worth clearly understanding that the effectiveness of your trading is directly affected by the trading conditions of your broker.
Download strategy template.