Important Economic News Are Usually Agreeable with Long Time Frames

Although it is not recommended to trade the news through the short time frames like 15min, still you can trade the news through the too strong trade setups they create on the longer time frames like daily, weekly and monthly. This is what we do. Usually most of the strong trade setups on the longer time frames form because of the strong economic news or events that many of them are shared with the public, but some of them are hidden and behind the scene. What we see in both cases, is the signals or movements that form on the price charts whether we know what the news was or not.

In most cases, a strong trade setup forms on a long time frame like monthly, and so the price moves accordingly while there is no special and important news, or if there is, we don’t know what it is. However, usually most of the strong and important news will follow the same trade setup that was formed on a long time frame sometimes several months ago. The question is whether the strong news follow the strong trade setups, or the market knows the direction of the strong incoming news, and so it starts moving accordingly in advance?

The economy and markets are strongly linked to each other. When the price reaches a too strong support or resistance level, and so a strong buy or sell signal forms, that is the time to make necessary changes on the economic factors like interest rate. Indeed, the too strong support/resistance levels determine the markets boundaries and limits.

When the value of a currency goes up too much, the economy and industries suffer because of receiving less orders from the other countries. This the time to lower the interest rate to lower the value of the currency to motivate the economy and industries.

Similarly, when the value of a currency goes down too much, the prices and the inflation are also too high. Therefore, they have to increase the interest rate to take the money out of the markets and flood it to the banks, to slow down the markets, and so, lower the inflation.

Why am I explaining this? Does it make any difference for retail traders?

You don’t have to care about these things if you just learn the strong candlestick patterns and trade the long time frames. You just take the too strong setups and make your profit, no matter why they are formed. However, what I explained above helps you to have a better understanding from the markets, price movements, and trade setups formation. You will enjoy your trading more when you know what is going on behind the scene. It is like driving. You can be a good driver while you don’t know how engine, gearbox, brakes, and… work. However, you enjoy your driving more, and you can be a better driver when you know how your car works.

A Good Example

Several months ago NZD/USD hit a too strong resistance level at 0.8841 that is the highest price NZD/USD could ever reach. NZD/USD formed a relatively strong short trade setup below this level by 2014.07.01 monthly candlestick.

Since that time, NZD/USD has moved down for over 1300 pips (read this). That resistance was apparently the only reason of forming the 2014.07.01 short trade setup. However, since this market has started going down because of the 0.8841 resistance level and the short trade setup that was formed below it, almost all important NZD related news have been agreeable with this short trade setup. For example, “Official Cash Rate” which is an overnight interest rate was released yesterday while they lowered it from 3.50% to 3.25%. This can take the NZD value even lower.

Why did they decide to lower the interest rate?

You should be able to answer this question now. NZD value had reached the highest level against USD. That was the time the market decided to sell NZD against USD, because the market container was full of the NZD that was already bought. It was overbought. The NZD high value had made New Zealand to receive less and less orders from the other countries, specially US. This is what no country likes. To boost the downward movement, they lowered the interest rate while NZD was already on its way to go down.

So, strong support/resistance levels on the longer time frames are very important. Central banks don’t change the interest rates when the price reaches a support/resistance level on the one hour chart, but they do it when same thing happens on the monthly chart. This is something that helps you a lot as a trader.

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Vahid Chaychi

Vahid Chaychi is an experienced web developer and internet marketer since 2002. He has been able to become the top seller/earner and affiliate with several different companies. He has launched his own affiliate programs as well. He is a blogging and WordPress expert with lots of enthusiasm in blogging and vlogging to share his knowledge and experiences. He is also a serious Kyokushin Karate warrior and a good snowboarder. Follow him if you like to become a financially free online entrepreneur. Visit his blog: VahidChaychi.com

70 comments:

  1. Thank you. It seems like you wrote this article for me 🙂
    I will restrain from taking trades on news releases.
    I will concentrate only on strong trade setups.

    Today I lost big money on trading the “US retails sales” and “Initial Jobless claims” new releases. I analysed the news figures wrongly and made wrong entry. 🙁 really very angry on myself. Also I will stop giving inputs to our members on trading news releases.

    This article is at the right time for me.

    thank you again. 🙂
    Prakash.R

    1. Prakash,

      We can learn from our mistakes. Believe me that it is much easier to make money through following the strong setups on the long time frames. Why should we make our lives complicated?

      You can recover your loss.

      Good luck 🙂

    2. Don’t worry Prakash, you will recover your loss in no time, probably the next too strong 100% set up.

      Thank you there are no blurred lines in your articles, everything is clear and precise, I never used to be constantly profitable till I joined LuckScout but now trading is more peaceful, profitable and fun.

  2. thank you, although you wrote about this several time, I think I got better and better insight every time a read again something about this from your post. It is not only the articles itself, the way you present and re-present them also really helpful for someone like me.

  3. “The question is whether the strong news follow the strong trade setups, or the market knows the direction of the strong incoming news, and so it starts moving accordingly in advance?” This is something I have been wondering about. Now I understand it better. Thanks for the clear explanation.

  4. Hi thank you once again. Don’t you think this movements on the NZD pairs are unusually huge? Some of them are even bigger than NFP movement.

    1. Nicolaas,

      NZD is related to a much smaller economy compared to USD. Therefore, even a small change in one of the important economic parameters can have a too strong impact. I think this huge movement is normal. 0.25% decrease in interest rate while the currency was already overbought makes a big fear in bulls and they convert to bears so fast.

  5. Thank you for this very informative article and thanks to your great site I continue to go onwards and upwards on this great journey called . I try to take 100 set ups but also defining my own trading style when they are not appearing . Just turned my first account in to 100% profit . No time to be complacent just keep learning and accepting is a ” Beast” ! Good luck to all best John

  6. Well done, this is not written by someone who just wait for too strong signal,it makes me wonder who is Pottorff
    Tnx

  7. Thank you

    Having a macroeconomic perspective helps us have better decision in our lives to take advantage of different economic conditions.

    It is important to know what to do with our money in different economic conditions that our earned money through trading does not go wasted.

  8. Hi, thanks fo the reminder we humans realy do forget easly..
    Scrambled around for the reason of the NZD change,forgot the monthly setup, found the answer on the econ calender. Good excample of human memory.

  9. Nice and informative article….Thanks. as usual Your all article are very helpfull for proffessional as well as New Bies…..

    1. Not sure Pete. There is huge debate out there regarding this subject Fundamental vs. technical analysis. Maybe a combination is good.
      I read this today by an analyst who claims to be the 2nd best trader in the world Bloomberg verified apparently a year or two ago. Dunno who the 1st best trader in the world is unless that is haha!

      Basically he said that charts definitely get overused by retail traders, and professionals don’t trade the market’s by simply staring at a price chart and waiting for it to give a signal of which way to trade the currency on the different pairs. He said a mistake that retail traders make is they line up all the currency pairs, and put their indicators on each one and just wait to see which pair gives them a signal next.Further he claims that is the worst way you can trade and if you do trade like that you stand a very high chance of losing money and the way you get your analysis is by studying the fundamentals and the sentiment so you can highlight which particular currency pair you wanna trade, which direction you wanna trade it in and then use the charts for an extra layer of analysis.

      He makes his point but for me personally, not being an economist I find fundamental analysis just too complicated for my brain so I prefer technical analysis! Also news does take a while to impact the markets anyway so should show on the charts, unless it an announcement by a Reserve bank governor like NZ the other day in which banks dropped their interest rates in that country in a matter of minutes and the currency dropped very quickly.

  10. Last night they lowered it from 3,50 to 3,25 and I remembered your analysis of NZDUSD may be down 0,62’s 😉
    Very good article agains

  11. And actually I dont belive news trading is bad becauses guessed NZDUSD may be will down and last night NZD central bank supports’s point of wiev..I think we should be patient and try to strong trade setup and if the news support would be wonderfull

  12. It does make so much sense the way you explained it that sometime I am wondering why I haven’t figured it out by myself. 🙂

    as you mentioned for NZDUSD should we see similar signs on all the NZD pairs or the majors give a good idea of whats going on?

    If wouldn’t be of you and your team and also the community that you’ve created, I would already have gave up. You give me the fuel to continue. I want to prove to the world that we can become consistently profitable by following you. I am grateful.
    Thank you very much sir.

    1. TJ,

      Thank you.

      After the news release, all the NZD cross currency pairs started moving strongly. NZD/JPY has almost the same condition as NZD/USD. However, it didn’t give us the chance to enter. In spite of this, if it breaks below the support line on the weekly chart, we can go short with it too.

  13. Hi!
    I rely heavily on you to read your articles and got me back on the balance and discipline of long term trade and this helps me really very very good and I want you to continue this so far!

    and I found a reasonable piering line on AUDJPY daily. and bought it and I think it will go higher!
    When you look at the monthly chart you will find the support area, and I think the price will go higher!

    correct me if you can!

    1. Nihat,

      AUD/JPY is a below a too strong resistance level on the monthly chart and it has already started going down below it. Although we like it to go up to test the line one more time and then go down, so that we can have the chance to enter (because we didn’t enter below the resistance level), it is possible that it never goes up. So I think going long with AUD/JPY is risky:
      https://www.luckscout.com/forming-formed- -market-trade-setups/#AUD/JPY

  14. The first lesson was with CHF, now we have the chance to see live the second lesson NZD, sorry about the person who they lose the money sincerely I don’t like that. Near I will be wait the JPY reaction, according to the last speech of the Japan Bank Governor. We have 3 choice in the market, Buy, Sell or do nothing. The best is to do nothing no loos no income .In this case what is the solution, already say fallow the biggest, we can’t doing nothing against them.

  15. I don’t normally pay attention to trading related “news”; more important basics yet to learn. However, noticing yesterdays huge gaps and spikes in the NZD charts and wondering “what’s up?”,my initial response was: “Ask!”.

    Thank you, Sir, for this in-depth and timely article. Amazing how you are able to anticipate and discern the concerns of your Followers. You are Great!!

    PS-Are you psychic? (jk)

  16. Hi,
    I put into practice your suggestions from your article may 31.2015 4:32 pm est.
    Great lesson! Thank you for that.
    For the moment I opened a short order NZD/USD and I am earning. I did not care of macro economic news. I expect a first T/P at 0.655291price,as you supposed, because not seen resistance in the descent towards this first goal. I still to trade with BB + strong candlestick pattern on Monthly and I will inform you about the future success or failure. This strategy to ride the FOREX like.

  17. What a wonderful one. Thanks for always repeating the most important things to always look out for and how to avoid wasting our money on weak trade setup. But honestly, reading your articles every now and then makes me see my mistakes and improve on analyzing the trade setup. Thanks a lot, you are wonderful.

  18. Hi,

    Very informative article. You never tired to remind us how longer timeframe trading is safer. Thanks.

    I remember on one of the chapter of Kathy Lien’s book, she interviewed a family who trade based on, I guess, fundamental analysis. If I’m not mistaken they are M Livian. I remeber their slogan: We Never Lose! I wonder if they use only monthly timeframe.

    By the way: brokers seem dont like if we trade only monthly or weekly or even daily because we will have less trade. The more we trade the more revenue they get. Hahahaha….

    Thanks!

    1. Andy,

      That is right. Brokers like traders who take and close several positions every day. They don’t like swing traders who hold their positions for a long time. That is why so many haters are attacking us. First because I have revealed what MM brokers and also the false ECN brokers have behind the scene. And second because I encourage people to trade the long time frames and avoid trading the short time frames.

    2. Hi,

      Thanks for the reply.

      Apologize if my questions below are quite personal. I am interested in investing/trading rather than stocks, but using only Monthly timeframe. It is a matter of higher return and probability. Of course if I have a lot of money I’ll do both 🙂

      1. May I know how’s your experience or success rate on taking the monthly timeframe trading? It seems monthly timeframe has the highest success rate. Even the not-too-strong Dark Cloud Cover like on AUD/CHF (August 2014) and NZD/USD (July 2014) could move the market strongly.
      2. Is it wise to risk 10% on our account if there’s a strong trade on Monthly timeframe? SL in Monthly is quite long, so bigger account is needed. In my case extend the risk. I know this is very personal question since it will mislead others.
      3. Do you use only the too strong setup to enter the market when trading Monthly timeframe or other strategy like support and resistance breakout. It seems the SR is very valid in Monthly timeframe.

      Thanks in advance and regards.

    3. Andy,

      1. As far as I remember I have never lost in trading the monthly frame. Of course, this is not because of the monthly time frame only. It is because I am too picky and strict in choosing the setups and entry levels, and I know when and where to enter. I have shared this with LuckScout followers so far, but still there are a lot more to share.

      2. I don’t recommend this at all as a general advice. I don’t recommend you to take more than a 3-4% risk maximum. In spite of this, I know some traders who risk almost the whole account and let the positions go. However, they don’t open a $1 million account. The account they risk is small, but big enough to handle the monthly positions. For example when they see a too strong long trade setup is forming on AUD/CHF monthly time frame, they open a $10-100K account and take a one lot position. They get out when they double the account. Those who work with me are successful with this method and I have never seen they lose their account, because they know where to enter and ask for our advice also.

      I am not recommending this to novice traders. I explained that just to give you an answer. There are a lot more details that I cannot explain here.

      There are too many more ways to trade and make money. We don’t have to risk too much.

      3. Yes, I use the other strategies too.

    4. Hi,

      Thank your for all the answers. It’s clear to me now.

      I love articles titled: Trading the Monthly Chart Is Lovely and the current article. It’s really open my mind. And now I’m waiting for another chance to trade in monthly timeframe.

      Thanks a lot. You always answer to all our questions and never forget to give us a very wise advice.

  19. Thanks,.

    I never gave much importance to fundamental analysis, but your article made me realize that some important economic events worldwide can help and complement the technical analysis.
    Could you indicate some form of keep us updated with these economic events?

  20. Hi – Thank you so much. Like Prakash, I too think you write this column for me too.
    I question myself as to why I trade news and the lower time frames, when I know you shouldn’t.

    I think the answer is with me being impatient. I want to trade the longer time frames as you say, but the fact is I don’t have the kind of funds required in my account to place the SL at appropriate place. The monthly is definitely out of the question, and many times, so is the Weekly. Therefore I step down to analyzing the Daily time frame, and quite often entering using H4 breaks of S/R.

    Believe me, I would love to trade off the Monthly’s but can’t see how to afford it. Does a person work their way up from H4 to the monthly’s as they progress and their account grows?

    Forgive me as I know you’ve probably answered this elsewhere, but I’m new here and it’s a big site with lots of info and wonderful people contributing.

    Anyway, Thank you. I’ve made my decision to stay away from news. You saved another 🙂

    1. Gladys,

      Thank you too.

      This is the problem that most traders have. You are not alone. However, there is always a good solution for each problem. We just need to be wise and strong enough to find that solution. In one of my articles, I have discussed this topic:
      https://www.luckscout.com/what-if-you-dont-have-money-to-open-a-reasonable- -live-account/

      Of course in that article I have not talked about trading the monthly time frame and the account size it needs. I have talked about having no enough money to open a reasonable live account. However, the same strategy can be used in your case too.

      Let’s not to look at this as a problem. I look at it as an opportunity. While you cannot have a big enough account, you can keep on demo trading and saving money, or growing your too small live account Slowly But Surely. This will have two advantages for you: (1) You learn and you master your trading system more. You gain more experience and you become able to control your emotions better. (2) You save money and you open your live account when you are too skilled and experienced. This is better than having enough money to open a big account now, and then blowing up the whole account with a bad trade.

      So this is an opportunity. You are lucky that you have this opportunity while those who have enough money to open a big enough account are at risk of losing their money.

      Here at LuckScout, we are working to help you to pass these stages and become consistently profitable traders risk free. We are so close 🙂

    2. Thanks, I have same situation as Grace. But I still look at daily, weekly, monthly. I enter daily in context of higher time frames and so far so good although my account is small. Thank you

  21. Hi,thanks for this educative article. It gives one a better understanding of the market.Many thanks for being there for us.

  22. Refresher articles are very important … Like you said …We humans tend to forget or dismiss the importance of many trading factors…Thank you for continued teaching..:)

  23. Thank you so much. I feel extremely grateful that you replied, as I can only imagine how busy you are, yet you took the time to help me. I’m honoured.

    I took a while to post this because I read the articles and links you provided. Also looked deep within and had a good chuckle.

    I am absolutely shocked! It feels as though the words you’ve written, are already in my head. You’ve addressed EXACTLY the challenges I feel. Incredible!

    I know know where I am on this journey. I’m at stage 2. And now thanks to you, I know where I have slipped up. I had been demo trading for 8 months and told myself I would go Live when I doubled it.

    Went Live at start of this year, but only with $500. I can afford to fund it with $5000, but I didn’t because still not completely confident.
    The physiological part of trading with REAL money is what I wanted to test myself on. A little scary at first, but now I’m comfortable with it.

    The part where I am handcuffed, the part that you have already identified for so many others already, is that the live account is too small to trade with properly.

    Even though I have the money to start a small live account, I’m going back to demo, work on the strategies you suggest (longer time frames) and then feel more confident and experienced to handle $5k account.

    You are correct again in stating that I am lucky. We are all lucky to have the pleasure in participating in this wonderful site you and your team have created.
    Oh so soon for your new program to be ready to roll out. Eagerly anticipating and very curious to see it.

    Again, Thank you sincerely.

  24. Hi

    Great article as usual. Thank you. I have a question that hopefully here is the right place to ask. Lately I came across with the idea of market profile when started reading a booklet published with the same name from Chicago Board of trade. I still at the beginning and not finished but also noticed indicators and software about market profile. Could you please comment if incorporating market profile into our trades specially for monthly and weekly setups may have any positive results.

    1. Majid,

      Thank you too.

      If you feel comfortable with market profile trading, then you can do it. However, I think in some levels it becomes too complicated to teach it here. There are always some very easy ways to trade and make profit.

  25. Thanks,
    Trading only strong setups on long TF is the way to go.It reliefs one of unnecessary stress.

  26. Thanks for giving us yet another useful knowledge. I guess this article emphasizes why Monthly TF is king.

  27. my man.
    the more i read you article ,the more i make profit
    i am copying all your advices,results are up to now more 45% in one month.
    thanks again

  28. hello again, i don’t recall if you ever said how large an account is required to use the longer time frames. would you tell how much is needed in actual dollar amounts please? i read all of your articles and others comments that time allows and the time it takes to understand and apply to actual trading. i won’t be using a live account until i make profit on my demo account. so far moving very slowly and still not recognizing the strong setups. wish me luck. should i use the demo account as a large account and only trade the longer time frames? len

    1. Len,

      I have never said anywhere about the account size. That is what each trader has to decided on his/her own. The rule of thumb is that you should always risk 2-3% of your account for each trade setup.

  29. Hi, you said

    “Several months ago NZD/USD hit a too strong resistance level at 0.8841 that is the highest price NZD/USD could ever reach”.

    My question is what showed 0.8841 was the highest level that NZDUSD could reach? What if the market decided to break that resistant level?

    1. Bright,

      You will see it if you refer to the monthly chart.

      If the market decides to go higher, it will hit your stop loss. This is what we are always prepared for.

  30. Also can changes be made to an important economic indicator like NFP to drive the USD value in a certain direction? If yes, how?

  31. Hi,

    Thanks a lot on your article, it as real changed my perspective on trading the financial market ( ). I have learn a lot from you, and i still keep on learning until i perfect this trading system.

    after analyzing the monthly time frame (seen strong trade setup), can i place a trade on daily time frame.

    1. I don’t recommend it. If a strong setup is formed on the monthly, then you have to take it based on the monthly and set the stop loss and target orders based on this time frame.

  32. I made huge losses too , trying to trade the news.
    I will follow’s theory of strong setups from this day.

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