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Bfbusa

Trading The PPI and CPI

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I have learned a lot about trading the Dow mini futures (YM) on this site and from SoulTrader. I like an opportunity to give back.

 

After watching, for a number of months, the way the YM futures react to the PPI and CPI, it became clear to me that this was a trading opportunity.

 

The strategy is simple quick and should appeal to expert and novice alike.

 

The numbers come about at 8:30 AM once about every middle of the month. Start watching the YM's ten to fifteen minutes before the announcement if you aren't already watching pre-market. Although I don't really care how the pre-market is behaving before. Then around 15 seconds before the announcement (8:29:45) Place and buy order 10 ticks above and sell order 10 ticks below the last price. If you do this earlier, you risk getting an early fill and possible in the wrong direction.

 

Be ready, as soon as you get filled, you MUST put your exit strategy into action.

This is traders choice. For me, I exit my first partial like one would play the OPG ( opening only plays), I sell partial at the first sign of weakness and set balance to break even. You have just locked in profit. As the trade progresses, just partial out.

 

I have played this strategy the last four months with 100% profitability so far.

 

Here are a few rules to consider.

 

1. Since I consider this an uncontrolled trade meaning there is no setup, target, or defined stop loss level, put on a smaller position size that you normally would. At least until you reach your comfort level. Because the those numbers come out, the market will become a loose cannon in the early going.

 

2. Leave the other unfilled order from your bracket in place, until you have your own stop strategy in place ( i.e. if your buy is filled, keep the sell order, if sell is filled keep your buy order ). The reason for this is what I said above, the market can whipsaw against your position.

 

3. Let your profit run. When the cash market opens, I've seen some very nice continuation in the direction the PPI and CPI had set the market in.

 

4. You should see a nice pop in price, >10 - 20 or so points in the money in the first few seconds. If you see a sluggish response, 10 points or less, be ready to exit b/e the trade may go against you sooner. Though my exit is the same. Book half and and place balance at break even.

 

5. Don't try this with the FOMC Announcement at 2:15 pm. The whipsaw can be much more violent and you can get ripped really bad. Better to wait for the market to settle and look for an entry later.

 

Give it a try and let me know what you think.

 

Any and all thoughts welcome.

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Interesting I'd like to research that for myself. I do trade these reports using a fast news service with autoclick on british pound and euro futures. What is the liquidity like at these times - do you get really bad slippage? Here's my news trading journal Forex News Trading Journal

 

You may wish to consider using currency futures instead because they tend to react more to the news.

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Hi keymoo,

 

I have gotten pretty darn good fills bracketing stop market orders 10 point above and below the last price just 20 or so seconds before announcement. Liquidity is not a problem. A-mini's can become as active as in the regular session, and sometimes more so, for the first few minutes.

 

But remember, I don't stick around in the position very long. As soon as I see signs of a pullback, I'm out. I tried to scale out but I get stopped out more often than not at the entry cutting my gain in half or more.

 

Hmm....currency futures.. sounds interesting. I'll give it a look, thanks for the info.

 

Good Trading.

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Interesting I'd like to research that for myself. I do trade these reports using a fast news service with autoclick on british pound and euro futures. What is the liquidity like at these times - do you get really bad slippage? Here's my news trading journal Forex News Trading Journal

 

You may wish to consider using currency futures instead because they tend to react more to the news.

 

I wrote my own Excel macro that was linked to Reuters and my broker that automatically placed a trade based on the actual figure's deviation from consensus. Is that what you do? I didn't get filled most of the time so moved on to better ways of trading.

 

I notice the liquidity on YM immediately before 0830 economic data being released is sometimes single figures and the price gaps rather than moves up. I'm sure that if you looked at the time and sales hardly any contracts actually traded. Has anyone actually tried this straddling method on a live account?

 

Looking at the charts, fading the spike seems a better strategy but I've never tried it.

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Has anyone actually tried this straddling method on a live account?

 

Hi Notouch,

 

Yes, I have.

 

I wait till about 20 seconds before the announcement and place an entry 10 tics above the 10 tics below the last price. Market not limit.

I am taking advantage of the knee jerk reaction that usually follow the news. Thats why I will sell as soon as I see a pullback because at that point the market can be unpredictable in my opinion. I've never tried fading this.

 

 

I have been studying the Ym's reaction to the PPI and CPI since last year and have traded this strategy for 3 out of the last 4 months. I am still fine tuning the technique but out of 6 trades, 5 were profitable, the 6th, Jan. CPI, I canceled the orders because the price was gyrating between the two entries for too long, too much indecision.

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You've been very lucky so far. If you use a market order there's a risk of massive slippage - getting filled at the top or bottom of the spike. The price is obviously gapping straight through the tiny number of bids or offers. You've obviously been one of the lucky few to get filled at a good price. One bad case of slippage could wipe out everything you've earned.

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Hi notouch!

The PM does not work I just learned.

 

You have said that you have an excel macro for news trading with autoclick. Would you be willing to e-mail it to me for free, and explain to me how to set everything up? Would be awesome!!

Thanks!

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