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Doing A News Trade In Forex
Generally in forex trading. We analyze and study the market to predict it’s move and then place our trade. This thing makes it far from gambling because we apply put knowledge and skill in analyzing market.
In forex, we can either place a ‘buy’ order trade, which is profitable if market goes up. And a ‘sell’ which goes profitable if market goes down (it is like a simulation, where I borrow 1kg rice from someone when price was high, sold it. And rebought it at the lower price and gave 1kg rice back to my lender and kept the surplus amount in money as a profit)
In news trade, the market loses its predictably. For example if a speech of Trump is to be started at 5:30. At exactly 5:30, market would give a sudden up or down move. We can’t effectively predict that move, so what we do instead is a sort of automatic trade placing. Which is a strategy, not for market trend analyzing, but to be able to catch the move of market and make profit, whichever side it goes.
In an example,
An ounce of gold was 1500 at 5:29. When the news breaks, the rate would either go high or low in a fast move. We don’t know the move. So instead of putting one trade, we place 2 trades. A buy trade at 1510 (it means if the price starts to surge up, when it will reach 1510, automatically my buy trade would start, and the more higher it goes the more profit I received) and I’ll aslo place a sell trade at 1490.
For example if price went up in a short fake move. My buy order maybe placed (which means I would receive loss if the price drops that level) and then the real move of market (which is down) starts. Then I will lose money, but because of my preset automation, automatically as soon as my loss would cross over 10 dollars, my buy trade would close ( and i would receive 10 dollars loss) BUT at the same time my ‘sell’ trade would start . Which by the end of the move of market would give me profit greater than the loss of previous trade, so in totality I make profit. So either way the market goes, I make a profit. Because of combination of trade I put on automation.
If we would look at it by seeing singular trade, it may feel as like gambling, if we were to place only one trade. Because we can’t predict the move beforehand and it’s impress.
But combined with this strategy, where we place 2 trades orders that trigger in their respective area, we would very highly likely make combine profit. Where either our first trade would go profitable fully and the market never reaches the point where the second trade starts. Or we incur loss in first trade, as it gets closed, but immediately another would start, which would give greater profit than loss incures (because this time we catched right move of market).
Would such trading be seen as gambling? As if we focus on single trade, it we don’t know the move of market and it can give loss as it’s not predictable, it gives a shade of gambling, but because of the combination of trade we are able to catch both possibilities. Where even if our first trade was loss, the other immediate trade automatically goes profit more than the loss most of the times effectively, and now it feels more closer to be associated with skill of cleverly trying to catch the right direction of market and make profit.
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2 Replies
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Doing A News Trade In Forex
updated 1 month, 2 weeks ago
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It is Speculative Trading, not gambling. Speculative Trading is relatively a shorter term strategy that mainly relies on technical / sentiment analysis and aims to benefit from price fluctuations in a short duration. All kinds of trade are halal except those that may involve something immoral or unjust. If those aspects are avoided then there is nothing wrong with speculative trading.
Gambling, on the other hand, involves “mere chance” being played collectively by people (2 or more) where one party is bound to gain from other party’s loss. And the party gaining had no moral right over the money being earned.
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@Umer25 a few points that I would like to clear is that.
During “news trade” the market becomes very unpredictable (at least on my level). So the thing of technical analysis becomes absent here. So now it’s either (smaller loss + bigger profit = total profit) or (bigger profit from beginning)
Secondly, in market whenever we someone closes a trade. It does affect the move (varying from very minute to a noticible, depending on volume of buyers/sellers and our trade size) that is because we create a minute difference in either demand and supply of something. And so technically the profit we make, through indirect farther channels equates/results into someone’s loss or decrease of potential profit he could have made. So will this be categorized in making money which is standing on loss of someone?
Thirdly, we don’t actually own the asset we ought to “buy”. We don’t take it’s ownership like in spot trading. We only take a temporary ownership, which cannot be used in any other way, but only to be sold later. And either a profit or a loss is made is upon the move of market. And whatever we buy ie gold. I cannot take any other benefit of it at all. So here do I really own the thing that which I sell, I deserve the right on its price? Or is it like I do not actually own the thing, but I am given money if the price of it increases, whose move stands on “luck” During “news trade”?
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