Should I Use A Stop Loss Order When Trading News

#1

Today’s (July 5 2013) news trade (Emplyment Report) made some good moves, but I lost money only I think because I did not plan accordingly. I straddled 3 of the forex pairs. One side of the straddle made money while the other side lost money. But the losing side lost a little more than the winning side unfortunately.

I think I shoudl have placed a stop on each side of the straddle. So eg. the GPB/USD tanked right at 8:30 am. If I had placed a stop on the long spread, then the market would have taken my losing long spread out with a smaller loss, while I let the short spread run more profitable. I would also have placed a stop on the short spread as well, since no way to know which way the market woudl move. Does this sound like a good strategy to limit the losing side of the straddle?

Also, I dont think the 10 am expiry of the EURO/USD nadex spread was available.

#2

Yes on a straddle you expect one side to lose and one side to win. Though every once in a while we win on both sides when it shoots in one direction hits the profit target and turns around and goes the other direction (or we at least may be able to exit the [original losing side] other side at breakeven further increasing our net profit on the trade).

Remember you can’t place stop orders on Nadex only limit orders. But you can do a virtual trailing stop. Meaning ticket is open to exit.

The way I do this is i would have the working ticket open to edit and enter the price where i would be breakeven

ie say i risked 25 on one side and 25 on the other side - i would set the take profit at least 25 ticks above my long entry so if i exit i cover the short side

Now if that is far away i will move it closer to the market to help ensure i lock in some more profit (but by keeping it below the market price on a long it is easier to get out without having to adjust the order a bunch if the market is moving.

So the strategy is not to limit the losing side it is limited itself already by being a spread. The strategy is actually to take profit early on the winning side when the number is not hit (the divergence from expectation) when we can exit at a breakeven net on the position. Then wait for the next one.

Make sure if you exit the position you either A edit your working orders or B cancel any pending working orders after you are flat on the position (you don’t want any “take profit” limit orders sitting in the market

The EUR/USD spread was available.