To trade or not to trade the release
Lesson 16 · about 10 min
The most important decision about any scheduled event is made before it happens: are you going to trade it at all? There are three honest positions, and each is a legitimate strategy. What is not legitimate is drifting into a position at 8:29 because the screen is exciting.
The three positions
| Position | What it means | Who it suits | Main risk |
|---|---|---|---|
| Flat through the event | No position from a defined time before the release until a defined time after | Most discretionary traders, especially those with tight stops | Missing a move you had a view on; this is an acceptable cost |
| Hold an existing position with reduced size or a wider stop | The swing position stays, sized so the event's plausible worst case is survivable | Swing and position traders with a thesis that spans the event | Gap through the stop; slippage at the print |
| Trade the reaction | Enter only after the print, in the direction the market chooses, with structure | Experienced intraday traders who have logged many events | The first-move fake-out; wide spreads |
There is a fourth position that many people take and few admit to: guessing the number and positioning for it before the release. Forecasting one print better than the consensus of professional economists is not an edge most retail traders have, and the reaction to a correct guess can still go against you (Module 1). If you want to do this, do it with a size that treats it as a coin flip, because that is roughly what it is.
Why "flat" is a strategy, not cowardice
The arithmetic from the risk-management course applies. If your normal stop is 10 ES points and the typical CPI-day first move is 30 to 80 points in either direction, your stop provides no protection: you will be filled well through it, and the position will be decided by the print, not by your setup. A setup that requires a 10-point stop is simply not compatible with holding through CPI. Being flat is the only way to keep the stop meaningful.
Flat also preserves attention. Traders who are in a position during the release watch their P&L. Traders who are flat watch the tape, and the tape is what you will trade for the next hour.
A decision rule you can write down
Before each event, answer four questions:
- How big is the typical move for this release in my instrument, right now? (Use your own log; Module 3's table is a starting point.)
- Is that typical move larger than my stop distance? If yes, flat, or hold only with a wider stop and smaller size.
- Do I have a swing thesis that survives the plausible worst case? If not, flat.
- Have I logged at least ten of these events without trading them? If not, flat, and log this one.
If all four come out in favour of holding or trading, you are allowed to. Most days for most traders, the honest answer to at least one is "no," and that is fine. There are eight FOMC decisions and twelve CPI prints a year; missing them costs nothing if the rest of your trading works.
Key idea: Decide flat, hold-with-adjusted-risk, or trade-the-reaction before the release, in writing. Guessing the number is a fourth option that most traders should size as a coin flip or avoid.
When holding through makes sense
A swing position that is up 3R with a stop trailed to breakeven can survive most events: the worst case is a scratch. A swing position that is at entry with the original stop cannot. The general rule is that events are for positions with cushion, not for fresh entries.
Some traders cut a swing position by half before a major event and re-add after. This locks in some gain, halves the event risk, and costs a little if the event goes the right way. Whether it is worth it depends on how correlated your thesis is with the event: a long in a homebuilder before FOMC is very correlated; a long in a pharmaceutical company before NFP is barely correlated at all.
Events you may not have noticed
The calendar has more on it than CPI and the Fed. Check for:
- Treasury auctions (3-, 10- and 30-year, usually at 1:00 p.m. ET in the week after NFP), which move the long end and occasionally the whole market.
- Options expiration (monthly, third Friday) and quarterly futures roll, which change the flow.
- Earnings from index heavyweights, which can move ES and NQ more than most data.
- Speeches by the Fed chair, which are scheduled and often more market-moving than minutes.
- Foreign events that land in the US session: ECB decisions at 8:15 a.m. ET, BoE at 7:00 a.m. ET, and Chinese data overnight.
A trader who does not check the calendar every morning is trading events without knowing it. The site's calendar at /news/calendar lists them with times converted to your zone.
Try it: For the next five scheduled high-impact events on the calendar, write down in advance which of the three positions you will take and why, using the four questions. After each event, note whether you kept to it. Keeping to it is the metric; profit is not, yet.
Recap
- Three honest positions: flat, hold with adjusted risk, or trade the reaction. Guessing the number is a fourth that should be sized as a coin flip.
- If the typical event move is larger than your stop, your stop does not protect you; flat is the only way to keep it meaningful.
- Four questions before each event: typical move size, stop comparison, swing thesis survival, and whether you have logged enough events.
- Events suit positions with cushion, not fresh entries; consider halving correlated swings.
- Check the calendar every morning; auctions, expirations, heavyweight earnings and foreign decisions are events too.