The straddle trading strategy is a neutral forex news trading strategy.
What do I mean by “neutral?”.
Well it’s this:
You don’t care about what direction price will move after the news is released.
All you really care is that whichever direction it moves after news release, you want to able to catch that price move.
So how do you do that?
You do that by what’s called a straddle trade…
A straddle trade is in fact a breakout trade:
- you place two opposite pending orders and wait for a breakout in one direction
- when one pending order is activated on the breakout, you immediately cancel the other pending order.
Currency Pairs: EURUSD, AUDUSD, GBPUSD, NZDUSD, EURGBP, USDJPY, USDCAD, USDCHF
Timeframes: 5 minutes or 15 minutes.
- Identify the nearest resistance level in the 5 minute or 15 minute timeframe. Also identify the nearest support level in the 5 or 15 minute timeframe.
- About 1 minute before the news is released, place a buy stop pending order 2-3 pips above the resistance line. Also place a sell stop pending order 2-3 pips below the support line.
- Stop loss: for the buy stop pending order, place it 3-5 pips below the support line. For the sell stop pending order, place its stop loss 3-5 pips above the resistance level.
- Take Profit Targets: Aim for 60-100 Pips or use risk:reward ratio of 1:3 to calculate your take profit target.
Advantages of The Straddle Trading Strategy
- an easy forex news trading strategy
- it is really reliable trading system if there are no price whipsaws before or just after the news is released, and also if price does not move past the support and resistance levels before the news is released.
- quick profits, anywhere from 50-150 pips in just a few minutes
Disadvantages of The Straddle Trading Strategy
- price whipsaws can activate both your trades before or just immediately after news release and knock our both your stop losses.
- this can also happen when spreads are increased during news times.
- if the range distance between the support and resistance level is greater than 50 pips, consider not trading.
- there will be times when price will pretend to move in the right direction based on the news but just a few minutes later, it will make a complete turn and can hit your stop loss. So if you don’t cancel your other pending order quickly, it can also activate it and then if it changes direction after that, you can have two stop losses being hit.
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