Straddles On News
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thread: Straddles On News

  1. #1

    Straddles On News

    Dear Fellow 4X Followers and Friends:

    STRADDLES ON NEWS
    The following technique was imparted to me by Michael Stewart and I have only started testing it using quite decent results. It was evident from reviewing his real, personal account he uses it together with frequency himself.



    Employing the free Global Economic Calendar from Daily FX at http://www.dailyfx.com/ (click on the ”Calendar” tab in the top and when you get to that page, which is an American occasions calendar just, immediately to the left of the you may see the words International Economic Calendar, click on these which will take you to the current economic calendar), you select the bolded events to the day time and states of interest to you. It is also highly probable that our very own superb economic calendar will serve well for this particular purpose, and, honestly, it was for this very reason that I went searching for this a calendar and that's how I found my way for this website in the first loion.



    Employing the 14 pub ATR plus or minus a couple of pips off the 15 minute, 30 minute or 1 hour charts, you decide on a straddle about five minutes prior to the scheduled event utilizing a 60 pip limit along with a 30 pip stop loss. If the chart moves in response to this news in either direction, one leg of your straddle will activate. Contrary to the NFP, which shows instant, explosive motion a massive majority of the time, these motions may take hours. The drama is fully automated once you set your straddle, so all you have to do is check the chart some hours later. If the chart is in profit but has not restricted out within 24 hours, I believe the better part of wisdom would be to shut the transaction and choose your profit straight there.



    Once the play functions properly, you tote a 60 pip winner with minimum effort and Mike said with pretty great consequences. The 4X is very sensitive to those scheduled news announcements and the Japanese Yen seems as it works well for this play. I'm sure some charts are better than others and some news events more probable than other people to produce fantastic results but only field experience will demone that.



    The major issue isn't to set your straddle too tight. As you don't have any doubt noticed, frequently a huge spike in the two directions will accompany a news announcement. Whether that is the professionals manipulating large amounts of cash to take out improvidently placed stops and activate improvidently placed straddle entries or even some broker shenanigans, I have not the foggiest. All I understand is that the phenomenon is really consistent. If you set your straddle too tight, the two legs will activate and one leg will stop out using a 30 pip reduction, and, if the other limits out, your profit on the drama will be just 30 pips.



    Mike uses the 14 pub ATR because he said it was his experience that banks and other large institutions favor that period for its calculation in order to set entry orders for their very own automated reversal progr developed to hedge them from large losses. The default period on many charting appliions for calculating the ATR is 7 bars, however all of them, I'm sure, permit you to set your personal period.



    I recommend strongly you examine any methodology at a demonion first before risking real money. This is just prudent. And if you do field test it, then I would love any feedback you care to provide on your own experience and suggestions for optimizing the drama.



    Great Trading, all!



    Respectfully submitted,



    Yr. Fellow 4X Trader,



    hiyo

  2. #2
    you can get burned by performing news straddles because stoplosses can get jumped in highly volatile markets. But if you use options instead (buy an in the money Call and Put in precisely the same time) you can eliminate the risk of your stoploss being jumped, and you might just earn some good money.
    Merlin, it appears to me that your egy would pay off in both directions. If there is volatility and motion in both directions, the call option and the put option would have to increase in value. However, it also appears to me that you would have to be all over the trade. You would have to be able to pull the trigger quickly to dump the alternative whose value has increased. And then, you would have to pull the trigger quickly in the other direction. Have you used this egy or would you use this egy on a regular basis? Can you comment please?

  3. #3
    Who's Michael Stewart ?

  4. #4
    Umm... is Michael Sewart related to Martha Steward? lol

  5. #5
    umm... is Michael Sewart Associated with Martha Steward? Lol
    Is Michael Stewart related to Martha Stewart? Not that I'm aware of, Liquid! Nor is he related to Jimmy Stewart, Stewart Granger or any other famous Stewarts (if there are any others), at least that I know of. I suppose he has to be related to some Stewarts somewhere (when he wasn't adopted) and that I know he's kids and I presume he's related to them. But when you come right on down to it, just his wife or a DNA tech would know that for certain. . .but perhaps only the DNA tech would know it. I think there was a British Royal Dynasty by that name which generated at least 2 Kings of England, Charles I and Charles II. Charles I became the first King of England to be convicted of treason and he was beheaded and succeeded by a fellow named Oliver Cromwell, who did not call himself a king, but just Lord Protector. After Cromwell's death, Charles II, Charles I's son, was restored to the English throne. Considering that the Michael Stewart I known to proclaims himself a boy of Ireland, I doubt he's related to the English Royal Stewarts. . .but who understands? A few of those olde English kings were in the practice of spreading their seed around pretty liberally, I understand. They wanted to be the Fathers of the Nation at a quite literal sense! Anything can happen, right? (Mark Douglas's First Fundamental Truth About Trading.)

    hiyo

    PS. MY view of the matter may be somewhat controversial (which would not be unusual) but I think Martha Stewart was scapegoated very poorly right here in Freedomland. She did wrong, no doubt, and by the strict letter of the law, she was guilty. But did not someone once say, the letter killeth but the spirit giveth life? (Anyhow, I hope they did! It is such a lovely sentiment, it would be a terrible shame if no one ever voiced it.) But when you consider what the main executives of Enron and the other failed corporations didn't so many using their misdeeds and what the Chief Executive of Refco has allegedly just done, her sins pale into complete insignificance compared in mine eyes. I think she just took up expensive cell space which was far more richly deserved by many, many other people who have a much more legitimate and enduring claim to it than she did! I'm certain she'll come out of it smelling like a rose. And her corporation too. She may not be the most famous man on earth but she is a highly successful, self-made entrepreneur and she is very, very far from being any kind of a heavy-weight criminal, despite the white-collar variety, at least in my personal opinion. (And, for what it's worth, I've seen worse-looking females in my own life, that is for certain. Oink!)

    (Men! We are hopeless, hopeless, hopeless! Sex. Sex. Sex. That is all we think about. All the time! Except when we're considering sports or money. And most of us just need to play sports and earn money so we can have more sex! Sheesh! What a tribe!)

  6. #6
    Senior Member raqwl.deji's Avatar
    108
    Merlin, it seems to me that your egy would pay off in both directions. If there is volatility and movement in the two directions, the call option and the put option would need to increase in value. However, in addition, it seems to me that you would need to be over the transaction. You would need to have the ability to pull the trigger quickly to dump the alternative whose value has increased. And you would need to pull on trigger quickly in another direction. Have you ever used this egy or would you use this egy on a regular basis? Would you comment please?
    Yes it would pay off in both directions. The name. Using choices, there would be a lot less action than you are describing.

    Every day or so prior to the news comes out, you buy a put and a call, both of these ought to be shut to ATM (in the cash).

    Afterward, an hour or so prior to the news comes out, you place your take profit orders to pay for the choices. So the orders are set before the news comes out.

    Lets say euro is at 1.2000 before news comes out, and you own a 1.2000 (strike price) call along with a 1.2000 put.

    If the market jumps to 1.2100 when news comes out, your take profit order ought to take care of shutting the call, and you could either hold on to the place before expiry in hopes of it going back into the cash, or sell it sometime later. Or just let it expire worthless, which might make the most sense because you wouldnt need to pay any additional commission on it.

    There is not a whole lot of responsive behavior needed. Where the reactivity comes in is if you are attempting to perform straddles using bracket orders rather than using options. Imagine if the market makes a gap? Imagine if your entry order is filled 30 pips worse than you expected your stoploss is further away than anticipated and your risk increases. Same thing can occur with your own stop, what should you get your entrance right but your stoploss gets jumped? Like happens on NFP statements?

    If you would like to play with fire, and trading the news I think about fire, then you should use the tool that gives you the most control. And options. You cant lose over the total cost of the choice, so your risk will be set precisely and there'll not be any surprises.

  7. #7
    Who's Michael Stewart ?
    Glad you asked, hagado! Michael Stewart is a professional Forex trader with 25 years of trading experience behind him. He started trading at the age of 16 in tle futures because his family owned a big ranch and they needed to do that to hedge prices for their herds. Following a stint in the U. S. Marine Corps, he returned to trading and started trading currencies in the early 1990s and has exchanged nothing else since. He's among the main architects of a well known, if somewhat contentious, automated trading program designed for Forex trading but I'm forbidden by the principles of the forum to talk about that at this time. I first heard him speak in November, 2004, at which time he sketched the outlines of a way of daytrading that the USD/CAD pair for me personally, and using it, I doubled my actual account in 30 days flat, so I was kind of impressed. I heard him again lately and he sketched the method that I simply shared with the team. I also had the rare privilege of seeing his own personal real trading account at that time. He deals regularly about the 10 standard lot amount and utilizes this method often, although he deals some different egies too. He said that he usually finds four or five transactions per week using this one, also, on a good week, experts them all. In 60 pips per winning trade, he beefs his account up by approximately $30,000 each time he does that. In the time that I seen his personal trading account, the account balance was $2.2 million dollars and that he had several open transactions, the largest of which was12,000 in profit and climbing. Recently, Mr. Stewart was invited to speak at a large financial conference in place of Donald Trump who needed to cancel suddenly for one reason or another. I'd sketched this brief thumbnail trading biography of Mr. Stewart in the first article I posted but that article turned out to be accidentally volative of the principles of the forum and was put into the Classifed Ad segment rather than submitted here in the store talk section and that I assume hardly any individuals ever bother with that that I should've realized that simply mentioning him from the blue here could be uninformative. Although extremely well known in his group, he is known to the general public at large, at least not yet. He claims to have taught more people how to trade the Forex than any other living soul on Earth. He impressed the heck out of me and put money in my pocket too, so that I became a fan. But I'm merely a fan, not a groupie. I'm only testing his egy in a demonion at this time. He only sketched its traces very briefly for me personally and it's my job to determine the nuances and Merlin has raised some serious issues over. In any case, my initial results have been OK but not spectacular. I am certain that there are several news events which are better to work with than others and some currency-pairs which are more inclined to respond with the appropriate volatility compared to many others. He might pull off 6 for 6 with regularity but that does not mean you or I could. . .at not in the start. God Bless The Demo Accounts! Invaluable!

    I handle what he says about trading in regard, which explains why I credited him.

    Hope this helps!

    Thank you for the comments!

    hiyo

  8. #8
    you can get burnt badly by performing news straddles because stoplosses can get jumped into highly volatile markets. But should you use options instead (buy an at the money Call and Put at the exact same time) you can remove the risk of your stoploss being jumped, and you might just make some great money.
    Thanks for the comments, Merlin! Point noted. But it also needs to be mentioned that very, not many news announcements of the SCHEDULED variety make the type of volatility or volume the NFP routinely does. These trades meander down or up over many hours in most cases. This exact same Michael Stewart fellow explained that not in all of his years of trading in the Forex has he had a stop dishonored. Plus some brokers are far better able to manage high volume and higher volatility compared to others, as those who play with the NFP frequently understand. And I have never been able either but I have only been trading live since February and that is nowhere near enough time to draw some valid conclusions about whatever.

    Attached please see charts of two recent news straddle winners on the USDJPY -- one from 10-16-05 and one from 10-25-05. These show pretty typical examples of the type of chart progression the usual news announcement produces, I think. And these were classic in the sense that neither you produced a head-fake spike effective at triggering the wrong leg of the straddle. They simply triggered the winning leg and it rode the chart nicely to victory. I think it's fair to say this is what it looks like when the play functions properly.

    But understanding how to use choices correctly is a very important skill for any trader who expects to some day go into the pro class to have, I really agree.

    hiyo
    https://www.cliqforex.com/attachment...8084385297.doc
    https://www.cliqforex.com/attachment...3773962910.doc

  9. #9
    yes it would pay off in both directions. The name straddle. Using options, there are a lot less action than you're describing.

    Every day or so prior to the news comes out, you buy a put and a call, both of them ought to be close to ATM (at the money).

    Afterward, an hour or so prior to the news comes out, you place your take profit orders to cover the options. So the orders are put before the news even comes out.

    Lets state euro is at 1.2000 before news comes out, and you also own a 1.2000 (strike price) call along with a 1.2000 put.

    In the event the market jumps to 1.2100 when news comes out, your take profit order ought to take care of closing the call, and you may either hold on to the place until expiration in hopes of it going back from the money, or sell it sometime later. Or just let it expire worthless, which might make the most sense because you wouldnt have to cover any further commission on it.

    There is not a whole lot of responsive behavior required. Where the reactivity comes in is if you're attempting to do straddles using bracket orders instead of using options. Imagine if the market creates a gap? Imagine if your entry order is filled 30 pips worse than you expected, today your stoploss is farther away than expected and your risk increases. Same thing may occur with your own stop, what should you get your entrance right but your stoploss gets jumped? Like happens frequently on NFP statements?

    If you want to play with passion, and trading the news I believe fire, you should use the instrument that gives you the most control. And options. You cant lose more than the cost of the choice, so your risk is put precisely and there'll be no surprises.
    Thanks for the feedback, Gentlemen. Very good advice. Details on how to do this with options.

    However, given the extraordinary high percentage of time stops ARE honored in the Forex along with the extremely high percentage of the time that average SCHEDULED news statements produce just slow, incremental moves, I believe the risk of getting burned is not quite that great. I think the NFP has skewed our view marginally with its antics. But admittedly there's always a risk that a scheduled news announcement could comprise information so volatile it does activate a huge movement in moments and if you're trading with a broker whose platform can't handle the actions along with your stop is blown through, you can lose enough to zero out your account -- but no more than that! I think that part of the art and science of investing in this market with the best ability is never leaving more in your account than is essential to cover your open trades and handle anticipated drawdown.

    R. Sub'd

    hiyo

  10. #10
    Junior Member Melmelada81's Avatar
    16
    you can get burned badly by doing news straddles because stoplosses can get jumped into highly volatile markets. However, should you use options instead (buy an at the money Call and place at precisely the same time) you can eliminate the risk of your stoploss being jumped, and you may very well earn some fantastic money.
    That is true with 'stock' equities. How do you go about setting straddles up with Forex? Do u use World Currency Options or Currency ETF alternatives? Ive had success with them due to the unwanted b/a spread the low volume. Whats your secret of using options?

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