Trading the news

Trading the news is one of the easiest and most popular strategies on the Internet. Most of all, it is recommended to novice Forex traders, but many professional traders also trade the news. Its simplicity lures. What could be simpler? The trader looks through the economic calendar, chooses a highly volatile economic news, waits for its release, and then, trades according to the published data. If the rates are worse than expected, the trader sells the currency of the country, where the economic rate is negative and vice versa. However, even despite such simplicity, a trader can fail.
The GBP / USD currency pair has always been considered one of the most difficult pairs to forecast, and April – May 2015 confirmed this.

Trading the news
As can be seen in Figure 1, 23.04.15 rates for retail sales in the UK are lower than expected, previous ones are also revised downward, and other fundamental indicators are also worse than it was predicted. After the news release, the GBP / USD pair fell by 40-50 points, but in less than 15 minutes it recovered, and after 25 minutes the uptrend started, despite the negative values of indicators. This could be called an exception, but in that month, it was most likely a pattern, as further shown in Figure 2.

In less than a week, the same pattern is observed after the release of the news on indicators for GDP (gross domestic product). It should be noted that GDP is one of the fundamental indicators for assessing the UK economy. Simplicity and availability? As seen in Fig. 2, the published indicators were worse than had been expected, the pair failed, but in 15 minutes it recovered and immediately went against the forecast. If the trader saw this forecast and, from this perspective, set Sell on the GBP / USD pair, then, most likely, trailing stop will activate (the pair rate rise 300 points more than expected).
In addition, in the same month, the minutes of the meeting of the Bank of England were published, which showed some weakness of the UK economy and its partial slowdown. But even after the publication, the pound sterling price rose. So, what it was, a technical rebound, a political component in anticipation of the elections in England on May 8 or the banal speculation of market makers in order to rise the price of the pair and sell it on more beneficial terms? We can only assume. Very often, such fluctuations in contradiction with the forecast can be observed before the start of the American session, when highly volatile news are published in the USA. In this case, the market is waiting for reporting from North America. It is also necessary to consider. This means that trading the news in respect of the GBP / USD currency pair is not as simple as it seems.
Nevertheless, in order to minimize possible losses on Forex, it is necessary to know and remember about adjusting trailing stops.