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This article written by Dr. Stefan Friedrichowski and Christian Stern was originally published in the September 2014 issue of Traders' Magazine.

  • Dr. Stefan Friedrichowski is physicist and full-time trader and manages the scientific work and the development of trading strategies and Christian Stern is full-time trader and heads the treasury and the education department at Trading Stars.

Traders always search for volatility – there is even a dependency of it, because without market movements you will not earn profits. Around the time of the publication of important economic news the stock markets often show erratic movements in many underlyings. We show you how to use these movements successfully with an example of EUR/USD. 

EUR/USD

The Trading Idea There are days when prices only move in slow-motion – there are only sideways phases and many false breakouts. But then there are days where everything changes: dynamic breakouts up or down, sometimes even to both sides within minutes. These events can take place completely unplanned (for example because of attacks, riots, natural disasters) or predictably at big news-events like the publication of the gross domestic product (GDP) or the NFP-data (non-farm payrolls) or a press conference of the Fed. Dynamic price movements take place, but you know the date and time in advance. We want to introduce a trading idea based on the monthly ECB-interest rate decision and we want to show that we can recognise a mathematical probability advantage and use it for a real profit. 

An old saying goes: “Close your trades prior to important news or at least protect them with a stop-loss.” 

This is absolutely true. There may be some insiders who know in advance what will be published, but the reaction of the market is hard to predict. For example nonfarm payroll data is published and they are better than expected, which should mean a bullish move. But maybe because of this the market fears that the monetary measures will be reduced and therefore the DAX drops 100 points. In hindsight we can always explain the “Why”. But to be honest, this could be an explanation for the contrary as well. The consequence is clear: Stay still and close open positions – unless you want to trade the news systematically. 

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Editors’ Picks

EUR/USD consolidates modest rebound around 1.0650

EUR/USD consolidates modest rebound around 1.0650

EUR/USD is about to end the week hovering around 1.0650, slightly below the level it had a week ago. Earlier on Friday, the pair bottomed at 1.0614, the lowest intraday level since March. The US Dollar lost momentum late on Friday on lower Treasury yields. 

EUR/USD News

GBP/USD heads for lowest weekly close since March

GBP/USD heads for lowest weekly close since March

GBP/USD is holding firm with weekly losses, unable to move away from 1.2200. The Pound is among the worst performers of the week after the Bank of England's decision to keep interest rates unchanged.

GBP/USD News

USD/JPY looks to approach 148.50 on BoJ’s decision to keep interest rates unchanged

USD/JPY looks to approach 148.50 on BoJ’s decision to keep interest rates unchanged

USD/JPY retraces the recent losses due to the BoJ’s decision on no-interest rate change. BoJ could consider adjusting its ultra-loose monetary policy when reaching a 2% inflation target is within reach. Investors await US data to gain valuable insights into the economic conditions in the country.

USD/JPY News

Follow us on Telegram

Stay updated of all the news

Join Telegram

Editors’ Picks

EUR/USD consolidates modest rebound around 1.0650

EUR/USD consolidates modest rebound around 1.0650

EUR/USD is about to end the week hovering around 1.0650, slightly below the level it had a week ago. Earlier on Friday, the pair bottomed at 1.0614, the lowest intraday level since March. The US Dollar lost momentum late on Friday on lower Treasury yields. 

EUR/USD News

GBP/USD heads for lowest weekly close since March

GBP/USD heads for lowest weekly close since March

GBP/USD is holding firm with weekly losses, unable to move away from 1.2200. The Pound is among the worst performers of the week after the Bank of England's decision to keep interest rates unchanged.

GBP/USD News

Gold consolidates above $1,920 ass US yields edge lower

Gold consolidates above $1,920 ass US yields edge lower

Gold price clings to small recovery gains above $1,920 following Thursday's sharp decline. Following the mixed September PMI data from the US, the benchmark 10-year US Treasury bond yield is down nearly 1% on the day at around 4.45%, allowing XAU/USD to stay in positive territory.

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Worldcoin Price Prediction: Is WLD done with uptrend after 77% rally?

Worldcoin Price Prediction: Is WLD done with uptrend after 77% rally?

Worldcoin price has paused its uptrend as it currently trades at $1.57. This move comes after the altcoin rallied a whopping 77% in just three days, between September 13 and 16. As WLD hovers aimlessly, investors need to be patient to catch the next volatile move. 

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Week ahead – US core PCE and Eurozone flash CPIs eyed after rate pause signals [Video]

Week ahead – US core PCE and Eurozone flash CPIs eyed after rate pause signals [Video]

PCE inflation to grab attention on Friday as Fed signals higher for longer. But markets might be more worried about a government shutdown. Eurozone flash CPIs will also be the in the spotlight on Friday. Chinese PMIs to be watched for recovery signs.

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