The "News Scalping" Strategy. Is this trading option possible?
News and the 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 of data.
They are the ones that are 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 the strong price momentum that occurs when news is released.
The "News Scalping" strategy is a multi-currency trading tactic that is not tied to currency pairs or time frames. Trading occurs only on those instruments for which key statistics are published.
Preparing a strategy. Setting up a news indicator
To trade using the "News Scalping" strategy, we'll need two data sources. The first is the economic calendar, which publishes news announcements, previous indicators, and analyst forecasts.
This calendar allows you to select strong and moderate news items based on their market impact, as well as access detailed information on them if you don't know the basis for the data and how they might impact the market.
The second data source is a dedicated news indicator that displays a list of news items and their release times directly on the chart. This indicator serves as a convenience feature for traders and helps them stay up-to-date on important economic data releases.
To install the strategy, you'll need to download the custom indicator at the end of the article and then install it in your MT4 trading terminal. To do this, go to the File menu of your trading terminal and open the platform's data directory.
Then, in the list of folders that appears, find the folder named Indicators and drop the news indicator downloaded at the end of the article into it. Also, find the folder named Template and drop the “Scalping on the 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 featuring major currencies and run the "Scalping on News" strategy template on it. You'll end up with a chart like this:
Trading Algorithm for the News Scalping Strategy
As already noted, for trading you will need two economic calendars: the first from the trading terminal, and the second from any broker's website or investing site.
The principle and algorithm of work is to compare the released data with previous indicators, as well as with the analysts' forecast.
So, if the published data is better than the forecast and previous data, it's a bullish signal! If the data is worse than the previous data and worse than the forecast, it's a bearish signal.
When scalping, it's crucial to open a trade as quickly as possible after news is released and lock in profits from a move that will last only a few minutes.
It is also worth understanding that strong movements are caused only by strong news, so in economic calendar You should choose news with two or three bulls.
It's crucial to understand that the data is published not for the currency pair itself, but for the individual country whose currency is part of the currency pair. As an example, let's look at positive data for the euro.
So, if the data on the euro is positive, then Euro/Dollar currency pair will move upward, and negative data will move downward. At the same time, positive data on the dollar will move the currency pair's chart downward, while negative data will move it upward.
The logic behind this influence is very simple: if your currency pair is Euro/Dollar, it means you are buying euros for dollars. Therefore, the stronger and more expensive the dollar, the less we will have to pay for euros, and vice versa.
The nuances of news scalping. Is this trading approach feasible in practice?
The market almost always reacts to the publication of key statistics, and the scalper's task when trading according to this strategy is to open a trade during the most active phase of price movement.
However, in practice, many traders may experience requotes due to a strong, rapid change in the asking price.
Also, many brokers limit the minimum trade holding time to a few minutes in their regulations, which is unacceptable when scalping on the news.
That's why, to put this strategy into practice, you need a broker with ECN accounts and direct access to the interbank market, which will ensure high-speed order execution.
In conclusion, it is worth noting that scalping on the news is an extremely profitable direction, but it is worth clearly understanding that the effectiveness of your trading is directly affected by the trading conditions of your broker.
Download the strategy template.
