Trading news events can be highly profitable but also risky due to extreme volatility. Many traders get stopped out due to sudden price spikes and whipsaws. To trade news effectively, you need the right strategy and risk management. This guide will show you how to capitalize on news events while protecting your trades.
1. Why News Events Cause Huge Market Moves
News releases, such as Non-Farm Payrolls (NFP), Consumer Price Index (CPI), GDP reports, and central bank decisions, create major volatility because they provide fresh data that can shift market sentiment instantly.
High-Impact News Events That Move Forex Markets
📌 Non-Farm Payrolls (NFP) – U.S. job report, released on the first Friday of every month.
📌 Interest Rate Decisions – Set by central banks like the Federal Reserve and ECB.
📌 Inflation Reports (CPI, PPI) – Measures price changes and impacts monetary policy.
📌 GDP Reports – Indicates overall economic growth.
📌 FOMC Meetings – Federal Reserve policy statements and rate decisions.
Why Do Traders Get Stopped Out?
🚫 False breakouts – Price spikes in both directions before choosing a trend.
🚫 Whipsaws – Price moves violently, hitting stop-loss orders before reversing.
🚫 Spread widening – Brokers increase spreads during high volatility, stopping trades unexpectedly.
2. Best Strategies to Trade News Without Getting Stopped Out
A. Pre-News Positioning Strategy
This strategy involves entering trades before the news release using key support/resistance levels.
🔹 Identify major levels where price may react.
🔹 Place trades with wider stop-losses and lower lot sizes.
🔹 Avoid placing trades too close to the release time.
📌 Example: If EUR/USD is near strong support before NFP and you expect a bullish reaction, enter long with a stop-loss below the support level.
B. Straddle Strategy (For High-Impact Events)
A straddle involves placing buy stop and sell stop orders above and below current price before the news release. This captures the breakout in either direction.
🔹 Set pending orders 10-20 pips above/below price.
🔹 Place a stop-loss of 20-30 pips on both orders.
🔹 Once one order triggers, cancel the other immediately.
📌 Example: If GBP/USD is at 1.2500 before CPI, place a buy stop at 1.2520 and a sell stop at 1.2480. If price moves up, the buy activates, and the sell order is canceled.
C. Post-News Retracement Strategy (Safer Approach)
Instead of jumping into the first price spike, wait for the market to settle and enter on a retracement.
🔹 Let the news release happen and wait 15-30 minutes for price stabilization.
🔹 Identify key retracement levels (Fibonacci, support/resistance).
🔹 Enter when price pulls back and confirms a direction.
📌 Example: If Gold spikes up 100 pips after FOMC, wait for a retracement to the 38.2% Fibonacci level before entering long.
3. Risk Management Tips for News Trading
✅ Use Wider Stop-Losses – Tight stops get hit easily during volatility.
✅ Reduce Position Size – Trade smaller lots to manage risk.
✅ Avoid Overleveraging – High leverage can wipe out your account in seconds.
✅ Use a VPS – To avoid slippage and execution delays.
✅ Trade Only High-Impact Events – Avoid unnecessary risks.
4. Common Mistakes to Avoid
🚫 Placing trades too close to the news event – Market can spike unpredictably.
🚫 Using tight stop-losses – Increased volatility can trigger early exits.
🚫 Ignoring spread widening – Some brokers increase spreads dramatically.
🚫 Chasing price movements – Wait for confirmation before entering.
5. Conclusion
News trading can be highly rewarding if approached correctly. By using strategies like pre-news positioning, straddles, and retracement entries, traders can avoid getting stopped out by whipsaws and false breakouts. Most importantly, risk management is key to surviving volatile news releases.
📢 Want live news trading signals and expert market analysis? Join our community:👉 https://t.me/forextradepip