fading the initial news spike - is this a real strategy or just getting caught in slippage
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i've noticed that big news events often cause a sharp spike that then reverses partially or completely. theoretically you could fade the spike - sell the top of a big up move or buy the low of a big down move after the initial reaction. but the execution seems incredibly difficult with slippage and spread widening.
does anyone actually execute a news fade strategy profitably? what does the setup look like mechanically?
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news fade is real and some traders do it systematically. the execution constraint you identified is the main barrier. the approach that minimizes slippage: don't try to catch the extreme tick, wait for the initial spike to complete and for price to start reversing, then enter after the reversal has confirmed by 3-5 pips. you give up some of the reversal but your fill is much cleaner.
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key distinction: fade the initial overreaction, not the news itself. the question is whether the number was genuinely surprising vs what the market had already priced in. a nfp that beats but doesn't beat by as much as the whisper number can spike and fade even though it was technically a beat. understanding the 'actual vs expected vs whisper' three-way dynamic is what separates systematic news faders from gamblers.
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how do you find out what the whisper number is? i only ever see the analyst consensus estimate.
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whisper numbers aren't always published but market pricing before the release contains them. watch the 30-minute move leading into a major number - if the market has already moved in the beat direction before the release, it has priced in the beat or more. a result that confirms what was already priced in often fades because the buy-the-rumor-sell-the-news dynamic plays out.
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the slippage and spread on execution makes news fading math negative for retail in most cases. you're paying 5-10 pip spread at entry, target is maybe 15-20 pips on the fade, and the news can also just keep going in the initial direction. the edge needs to be very clean to overcome the execution friction.
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the troll's math concern is legitimate. news fade at retail works best on ecn accounts with tight average spreads, not market makers that blow spreads to 15+ pips on news. also only worth it on the highest-impact releases with the biggest initial moves - fading a 20 pip spike where you pay 8 pips in spread isn't a good trade. fading a 60 pip spike with 8 pip spread is a much better proposition.
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