How to use the straddle trade strategy together with the news
For some people, the odds are always in their favor. They can be clueless about the market direction but always end up going home with hefty profits anyway. Some might say it is pure luck, but some may think otherwise. How is this possible? This can only happen when the price is volatile enough, and the price is always volatile enough when there is significant news like central bank announcements or economic data releases.
Some may say it is pure luck, but other people may tell otherwise. Why? Because trading news and trading as it is are never easy, let alone getting profits. To go home with hefty profits by trading news, one must know which news is trade-worthy. A news release that is trade-worthy when it can massively move the market. Also, one should know the right strategies to choose, and we are about to talk about one that you can add to your forex toolbox.
What is the straddle strategy?
Here is what you can do: look at the range 20 minutes before the actual news release. Its high will serve as the upper breakout point, while its low will now become the lower breakout point. The smaller the range, the more chances that it will show a massive movement because of the news report. These breakout points that we indicated will now serve as entry levels where you can place your orders. As for the stops, you can place them 20 pips under or on top of the breakout points. It would be best to aim for a similar range or at least identical with the breakout levels. We can call the strategy we used in this scenario the straddle trade.
You are ready for anything that may come up.
You are ready regardless of the price direction.
You can take advantage of any situation that will arrive.
By being ready and set, you can now go and take some action anytime the news arrives. All you have to do is wait.
It’s a win-win trade — IF DONE CORRECTLY.
Here is the thing with having a non-directional bias: your only focus is getting profits when the move finally arrives. Having a non-directional bias focuses solely on the fact that there will be a great move and not on the direction.
In straddle trades, there are times when there is a trigger in a single direction. Later on, you get stopped out because the price made a sudden shift of direction. There is no need to get panicked when this happens because the other entry will now be the one to get triggered. If this trade fortunately wins, at least you will have a tiny profit, and you can recover your losses.
On the other hand, if the price continued in a single direction and did not reverse, you will not have any losses that you need to recover. Of course, all of this will only be the case if you have done everything correctly. The fact that there will be a trigger either way makes you have more trading opportunities.
Is a straddle trade helpful?
Only you can be the judge of that. Major news events do not really have a lasting effect on price actions in the longer term, so you should not have unrealistic profit expectations. We hope that anyone who reads this can maximize the use of the lesson when trading news.