How to Trade on News Using the Example of the USA-China Agreement
Let me tell you right away that any trading textbook (any) starts with an article titled "Don't Trade on News!".
Just like that))
Now let's see how it was in practice. The price rose before the negotiations and the announcement of good news. As everyone writes, "the market has already priced in this information." In practice, this means that those who knew in advance about the outcome of the negotiations had already bought))
Then the negotiations happen, and at the moment of the good news announcement - the price starts to fall. Why? Profit-taking occurs on good news. Following that, there are mass liquidations (up to 700 million), which further pulls the price down.
Another example is with the Fed's interest rate. Logically, the price should have fallen upon the announcement that the rate would not be lowered. But it fell before. And then it started to rise.
So how to trade? My method: buying/selling at the nearest (!) significant level. Small risk = small profit. Agreed. But the key word here is "profit".
What is your method? Please share your ideas
