I have come to conclusion that the worst thing to happen to the forex market has been the releasing of the expert advisor within the MetaTrader platform. Metatrader has brought a lot of good to the trading world with a free charting platform that many brokers offer. But that forex robot/expert advisor component is a huge negative to many traders in the forex community looking to attain that new level of order flow trading success. The second worst thing has been the proliferation of all the various technical indicators.
I am not saying you can’t program a nice robot and make money that way. I am sure there are some people who have done well for themselves using forex robots. It gives them another choice with which style of trading they want to do. But I clearly remember many days long ago, where I was faced with a plethora of choices and had to make some very tough decisions. I would hear all these conflicting reports about using math with trading. One person would tell you that you need to have a high level of math and programming skills to succeed in trading or the quants are going to eat you up. Then I would have someone else tell me that you don’t really need complex math.
Eventually I had to make a decision about what path to pursue. I hated the programming/math route and always felt that trading was more of an art, than a mathematical formula. So eventually I decided on order flow trading and gave up hoping from forex robot to robot. One of the best decisions I ever made to study order flow, liquidity, news trading, global macro. When you actually start to understand the real reasons why the market moves a whole new world opens up that you were previously oblivious to.
I always wondered how to trade without charts when I first started trading. Eventually with order flow trading I figured out how.
Some people use charts, technical indicators, forex robots as a crutch in order to make trading decisions. Sometimes I feel it may be better if the traders just threw themselves into a room with no charts, no technical indicators, no forex robots and try to trade like that. Just be plugged into the order flow, information flow. You can have a quote screen, some time and sales and level 2 if available. A news feed. And try to trade successfully like that. And you definitely can. Some of the trades that I have made a killing on, I could have placed them without a chart. For the massive order flow which was generated was not related to anything on the chart.
Which brings me to my next point about people attempting to try to trade the news using expert advisors. I just recently got an email from some new trading the news forex robot that is going to magically place the winning trades for you. It claims you don’t need to know anything about the market, or the news, or about order flow, market sentiment, expectations. Nope none of that.
For this news trading robot will straddle the market with orders for you. Bracket the news with buy and sell stops and hope for the best. They are trying to trade the news spike. This is the same tired old game that existed back in 2005/2006. Only problem is the markets have changed since then. The prices that the spike traders want to transact at do not exist. They don’t exist.
Depending on the news release, the market participants will start to pull their liquidity from the market. Spreads will start to widen. Even on ECN’s and interbank platforms it can happen. When the news hits the spreads can still be fairly high depending on the news and market sensitivity to the news. Eventually a few seconds after the news comes out the liquidity starts to come back into the market and some decent transactions start being made. Depending on the news the market can spike to reprice itself to it’s new fundamental value. Since spreads are high, liquidity is low or non existent, the market can gap to a new price level. The news spike traders are attempting to execute at prices which don’t exist. Your forex broker can widen spreads prohibitively high for your to try to news trade the spike. Not only that, but liquidity may not be available for your market orders to execute.
You need to make a choice when you are going to place a news trade. Either you will place a trade before the news release or after the news release. Before the news release can be considered pre spike news trading. After the news release is sometimes called post spike trading. You can do both successfully. I particularly like the post spike trading because it has higher winrates, with slightly worse reward risk ratio because you are entering after the spike.
The pre spike trading can be doable, if you can predict the economic numbers or have a strong feel for what various officials will say. This typically has lower win rates as you are gambling a little bit on the news, but it does have higher reward risk ratios as you are getting in before the spike. But it does take a mastery of all the order flow trading concepts.
I would never give up trading the news to a mindless robot. Trading the news successfully for long periods of time, requires a human being at the helm. For done correctly, the humans can news trade circles around the news trading expert advisors any day of the week.
I will release every type of news trade that I am aware of in the order flow mastery course. And there are several different types of news trades for sure. Learn them all for maximum profit and if you want to make a killing.
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