What to think about positions around economic indicators

When the time for release of employment statistics and policy interest rates draws near, you may hesitate, thinking, “Is it okay to hold this position as it is?” Some people may have experienced the price moving sharply at the moment of the announcement, with a stop loss being triggered at a price farther from the expected one.

This time, we organize the criteria for how to think about positions around economic indicators. This is not about predicting market direction.

Things that tend to happen before and after indicators

1. Price movement becomes suddenly large
If the result of the announcement differs from expectations, it can move a lot in a short time. It may move up or down first, and then the direction becomes clear.

2. Spreads widen
Around the announcement, spreads can temporarily widen significantly.

3. Executions slip
When price movement is fast, stop losses and limit orders may be filled at prices away from the specified price (slippage).

What to check in advance

• Economic indicator schedule：Check the dates of important indicators for the currencies you trade on the economic calendar
• Announcement time (Japan Time)：Daylight saving time can make the announcement time in Japan differ
• Current position’s stop loss and loss amount：If the market moves significantly at the announcement, how far can losses spread

Materials to verify around indicators

• Possibility of losses exceeding assumed loss during sudden changes：Even with a stop order, rapid price moves can fill at prices less favorable than the order
• Spread widening：Trading costs can be higher around announcements
• Slippage：The order price and actual fill price can differ
• Current position size：Whether losses from large moves fit within your risk tolerance
• Assumptions of your method：Whether your method assumes sudden price moves or calm price moves
• Pre-set rules：Whether you have decided in advance what to do during economic indicators

Make it part of your own rules

If your decision criteria are not set, you tend to waver with every indicator. The following are examples of rule-making and do not constitute a recommendation for specific trades.

• Do not enter new positions in the〇 minutes before and after important indicators
• Record trades around indicators and review the results afterward

Decide what kind of rules to use based on your own strategy and risk tolerance.

Important notes

• The importance of indicators and their impact on the market vary with the situation
• Unscheduled statements or news can also move the market significantly
• This article is about organizing the materials for judgment and does not recommend specific trades

Checking the schedule of indicators should become a habit as part of your entry checks.

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