News will tell you When to Trade (Economic Roadmap) - Ep 25

Summary

The video discusses how traders can use the economic calendar as a roadmap to identify high-probability trading days. It emphasizes that price action and economic events must align for successful trades, particularly by leveraging news drivers that increase market volatility. The speaker explains how certain high-impact events like CPI, NFP, and FOMC should be approached with caution, while other economic data can help traders capitalize on volatility. By focusing on the right days, such as those with relevant news, traders can avoid low-volatility periods and increase their chances of success.

Takeaways

• 📅 The economic calendar serves as a roadmap for identifying days with high volatility and potential trading opportunities.
• 📊 Price action must align with the economic calendar for optimal trading conditions, especially around key news events.
• 💡 High-impact news events, like USD-related news for gold, bring volatility, which is necessary for profitable trades.
• ⚠️ Avoid trading before or during major events like FOMC, NFP, and CPI to prevent slippage and excessive risk.
• 🚫 Trading on news event days without waiting for volatility can lead to account losses due to unfavorable fills or slippage.
• 🧠 Day trading isn't about trading daily but knowing which days offer the highest probability for significant price movement.
• 📈 Gold trades are influenced by USD drivers, and other instruments like futures and Forex pairs react similarly based on the news.
• 📉 Monday's and Tuesday's volatility in price action often depends on the economic news released at the start of the week.
• 🧭 When price action and news are aligned, expect more stable and cleaner trades, with fewer chances of price consolidating.
• 🔍 Focus on pairs related to the currency affected by the news event, such as USD/CAD for Canadian dollar news.

Q & A

What is the importance of using the economic calendar when trading?

The economic calendar helps traders identify which days are likely to see market expansion or consolidation, based on news drivers. It serves as a roadmap, allowing traders to know when price action and news are in agreement, which increases the probability of successful trades.

How do economic news drivers impact market volatility?

Economic news drivers, especially high-impact ones, bring significant volatility to the market. This volatility is crucial for traders because it creates trading opportunities. Without volatility, price action becomes rangy or consolidates, making it harder to trade effectively.

What does it mean for price action to be 'in agreement' with the economic calendar?

Price action is in agreement with the economic calendar when the price movement aligns with the expectations set by economic news events. For example, if the price is hovering above a discount array and a significant news event supports a move higher, the economic calendar and price action are in agreement, signaling a good trading opportunity.

Why is it important to avoid trading during major events like FOMC, NFP, and CPI?

Trading during or just before major events like FOMC, NFP, and CPI can lead to slippage, where stop losses are not executed at the intended price, resulting in significant losses. The volatility during these events is unpredictable, and trading at these times can be considered gambling.

When is it safe to trade after major economic news releases like CPI or NFP?

It is generally safer to trade after the news release, once the market has digested the information and volatility has stabilized. Trading five minutes after the news release, when a clear setup presents itself, can be a good strategy.

How do kill zones relate to trading and volatility?

Kill zones are specific time periods during a trading session when the market is particularly volatile, which is useful for scalping trades on short timeframes like one-minute charts. However, kill zones alone do not guarantee daily market expansion, which is where the economic calendar plays a more critical role.

What are some examples of news drivers that affect gold prices?

USD-related news drivers, such as the Empire State Manufacturing Index or other US dollar economic events, are significant for gold prices. Traders should focus on USD news when trading gold, as these events bring the necessary volatility for price expansion.

How can traders predict which days will see significant market movement?

Traders can predict significant market movement by analyzing the economic calendar and looking for high-impact news events. If price action aligns with these events, such as being near a key price level on the same day as important news, the market is likely to expand.

What is the role of fair value gaps in the trading strategy described in the script?

Fair value gaps are key price levels where traders expect the market to reverse or expand. These gaps are used in conjunction with the economic calendar to identify days when price may expand, especially when news drivers support the expected price movement.

What is meant by the phrase 'day trading means knowing exactly the days that you want to trade'?

This phrase emphasizes that day trading is not about trading every single day, but rather selecting specific days when there is a high probability of market movement. These are the days when price action and the economic calendar are aligned, offering the best trading opportunities.