One of the most asked questions that I get on news trading is how to determine your entry. Let’s face it, spike trading is pretty much dead, with brokers playing tricks on you, widening the spread, delay execution, nasty slippage, you name it… unless you still deal with a broker that is from the dark ages of online trading, chances are you won’t find one that let’s you trade the news profitably, at least not for spike news trading… And for those who are still exploiting such brokers, you might risk account closure, or your broker may just outright take your money away on the basis of exploiting the market.
For those who don’t know what a News Spike Trading is, it is a style of news trading that a trader executes his/her order immediately after a high impact news release with the intention of taking a position seconds before his/her broker updates price feed. Since major news usually cause market to spike either direction, and this method aims to capture that spike, thus it is called news spike trading. This is in essence exploiting your brokers as they have to suffer financial loss due to latency in their price feed and actual market reaction.
I think is essential to understand this fact before we take look at what I’m about to share. Here is an analogy for you: Imagine one day you got a credit card in you mail and it has no limit on the card. It’s obviously a mistake but you decided to use it anyways, after all it’s free money, so you thought… until one day someone catches on, and cancels your card… This is exactly what is happening with news spike trading. Remember your brokers are necessary evils in your trading. They provide a service and they should get compensated, and when the market is moving in sharply due to news releases, they have the rights to protect their interests; all you need to know are the rules of the game, and play by the rules…
That’s why what I am sharing with you is going to make so much sense to you, if you trade the news; it’s called the Double Fibonacci Method.
I use this method everyday to calculate my entry after the news, and I have seen first hand how accurate this method is. You can use this with any high impact news and pinpoint your entry after release and prevent you from jumping in either too late, or too early.
So, without further ado, here it is: