The indicator shows the current date, time, the current spread and stop levels.
Author: Viktor Mossekhin
Forum on trading, automated trading systems and testing trading strategies
Scripts: News VLine
newdigital, 2014.01.30 09:25
Forex Spreads and the News (based on dailyfx article)
Financial markets have the ability to be drastically effected by
economic news releases. News events occur throughout the trading week,
as denoted by the economic calendar, and may increase market volatility
as well as increase the spreads you see on your favorite currency pairs.
It is imperative that new traders become familiar with what can happen
during these events. So to better prepare you for upcoming news, we are
going to review what happens to Forex spreads during volatile markets.
Spreads and the News
News is a notorious time of market uncertainty. These releases on the
economic calendar happen sporadically and depending if expectations are
met or not, can cause prices to fluctuate rapidly. Just like retail
traders, large liquidity providers do not know the outcome of news
events prior to their release! Because of this, they look to offset some
of their risk by widening spreads.
Above is an example of spreads during the January NFP employment number
release. Notice how spreads on the Major Forex pairs widened. Even
though this was a temporary event, until the market normalizes traders
will have to endure wider costs of trading.
Dealing with the Spread
It is important to remember that spreads are variable, meaning they will
not always remain the same and will change as liquidity providers
change their pricing. Above we can see how quickly spreads normalize
after the news. In 5 minutes, the spreads on the EURUSD moved from 6.4
pips back to 1.4 pips. So where does that leave traders wanting to
execute orders around the news?
Traders should always consider the risk of trading volatile markets. One
of the options for trading news events is to immediately execute orders
at market in hopes that the market volatility covers the increased
spread cost. Or, traders can wait for markets to normalize and then take
advantage of added liquidity once market activity subsides.