Hi Gold Enthusiasts!! “What the heck do we do with news in the gold trading??”

Before I answer that by detailing what I do myself, I want to relate a story that is very relevant to news trading and gold.

More of a psychological relationship really.

When I was younger, my family and I took our first trip to Maui. Hawaii is world famous for their waves and gorgeous beaches (and this is NOT in comparison to Australia, so hold your horses my Aussie friends, you guys have the HUGE waves).

I have been swimming since just a few months old including competitive swimming up until high school, and have always had an obsession with being in the water.  Of course, growing up in Southern California, I was no stranger to the ocean, and I was impressed by the waves in Hawaii.  My brother and sister and I decided to go for a dip and body surf these “little titans” one day.  As some of you may or may not know, waves do not come into shore in a uniform fashion.  Some waves are rather small and gentle, which may be followed by significantly larger and more ominous ones.

We learned “the hard way” there are 3 places to enjoy the waves:  1)  The Beach in complete safety, 2)  The “middle ground” where the water was up to your waist and 3)  Deeper water where you could not touch beyond the beach “shelf”.  Obviously no risk at spot #1, but although waist-high water (#2) seemed safe enough, while waiting to see what the next “set” of waves would be (giants or gentle), you got “trapped” if the wave was large because the undertow of the water coming from shore made it impossible to get back to the beach, while the water being sucked out from around your legs was far too shallow to swim before the wave came crashing down.

Inevitably, by maintaining this “middle ground”, it was impossible to get out and impossible to go deeper and the result meant you got literally crushed into the sand by any big wave.  There was safety in deeper water as the waves rolled right past you, but it required the strength and calmness to tread in deep water for an extended period of time while waiting for the small “set”.

Gold News Trading

This experience is no different than news trading with gold.  You have 3 choices:

1. You can just avoid ALL “red flag” news and not trade before it, or immediately afterwards
2. You can “feel it out” by playing each news announcement as it happens
3. You can simply stick to the trading plan and the news will do what it will.

I hope you can see that #1 is clearly the safest, as you will never get crushed by waves standing on the beach, and news will never hurt you if you are not exposed to it.  The only drawback is that much of the time, news doesn’t really move the gold market as violently as forex and you would be just fine if you had continued trading, although some news can be EXTREMELY volatile.  The second option is to be “creative” and just take each situation according to “feel”, and I liken this to standing the middle ground.

The problem with this approach is that you can’t really tell what’s going on until it’s on you and by that time it’s too late to do anything else or you won’t be thinking clearly to make a consistent decision.  The third choice is just to take the breakouts as they happen, and not care about what the news does.  Stick to the plan, and regardless of what news is coming out (with 2 important exceptions, more on that later), and take your trades, and damn the torpedoes.

Personally I am a huge fan of #3.  Be advised though, this takes having to sometimes watch your trade lose, and it also can be hairy as the market races against you, albeit temporarily.  I am NOT recommending anyone do this without properly understanding the risk involved.  The reason I take the risk is twofold:

1. In gold, news almost always confirms the breakout unless it is WAY off of what was expected.
2. The market doesn’t usually produce a nice, solid breakout before crazy news.

Gold News Trading

You see, since we only take trades at the end of the hour, and news happens almost always at the beginning, we are rarely entering a trade as news is being released.  We will find ourselves either in a trade already, waiting for movement, or having to wait for the news and the end of that resulting hour to take the trade on a breakout.  I have also noticed that gold tends to go “flat” while waiting for news that matters, and we often find ourselves without a setup before important news, and if the news isn’t going to matter, the breakout will occur and not be affected by the news coming out.

What ever you decide to do, STICK to it!!  If you want to avoid news, AVOID it.  If you want to trade the news, STICK to doing it.  Only those stuck in the middle without a consistent approach are likely to get hurt.

So what 2 news announcements worry me enough to not trade them?  NFP and FOMC.  Simply 2 days on the calendar to take off of trading gold.  Period.  Interestingly enough, even both of those news announcements can RELATIVELY be safely traded if you only enter AFTER the end of the hour on which they come out.  So the real advice here is just don’t be in any trades when NFP or FOMC are released.  Other than that, those who choose to tread the “deep water” should just disregard news as even mattering and just stick to looking for good opportunities to trade from solid breakouts.  Those who want to be on the safe side, stick to it and you will not be hurt.  By the way, I would NEVER, EVER give this advice in forex, SO DON’T copy these rules for FOREX!!!!

Also, TRADER BEWARE:  NONE OF THIS ARTICLE IS MEANT TO SUGGEST IT IS A “GOOD” IDEA TO TRADE AROUND IMPORTANT NEWS, AND THE ADVICE SHOULD ONLY BE TAKEN BY TRADERS WHO FULLY UNDERSTAND THE RISKS INVOLVED, AND HAVE THE DISCIPLINE TO EMPLOY CONSISTENT RULES AND TAKE 100% RESPONSIBILITY FOR THEIR TRADES.  I am merely trying to share my own approach rather than treat you as dangers to yourself.  After all, this blog is geared towards more advanced trading, and some of us have a higher than average risk appetite and I want to speak to all traders, not just the conservative.

On that note, let’s get out there and look for great trades my friends!!!!  Check the video below!!!

Weekly Recap from Last Week (8th May):

Omar Eltoukhy

GOLDTRADEMASTER.COM

Gold News Trading