High-impact news events compress hours or days of typical price movement into a few seconds. That creates opportunity for traders prepared for it, and outsized risk for those who aren't. Trading around news requires a different mindset than regular technical trading.
What Changes During News
- ▸Spreads widen sharply as liquidity providers pull back to manage their own risk.
- ▸Slippage increases — orders can fill well away from the intended price.
- ▸Stop-loss orders can be triggered and filled at worse prices than set.
- ▸Price can spike and reverse multiple times within seconds before settling into a trend.
Approach One: Avoid the Event Entirely
The simplest and most common approach for non-specialist traders is to flatten positions or stay out of the market entirely in the minutes surrounding a scheduled high-impact release, then re-engage once volatility normalizes.
Approach Two: Reduce Size, Widen Stops
Traders who want to stay in a position through a scheduled release often reduce position size to account for wider potential swings, and widen stops to avoid being taken out by noise rather than a genuine change in trend.
Approach Three: The Breakout / Straddle Method
Some traders deliberately trade the news itself, placing pending orders above and below the current price ahead of the release so that whichever direction the market breaks, a position is triggered automatically. This requires careful management, because both orders can fill in a whipsaw, or slippage can make the risk-reward unfavorable.
During extreme volatility, brokers may fill both sides of a straddle in quick succession as price whips through the range before settling — turning what looked like a low-risk setup into a loss on both legs. Always account for slippage explicitly when sizing straddle trades.
Position Sizing Before Known Events
| Approach | Risk profile |
|---|---|
| Flatten before, re-enter after | Lowest risk, misses the initial move |
| Hold with reduced size and wider stop | Moderate risk, stays exposed to the trade thesis |
| Trade the breakout directly | Highest risk, requires strict execution discipline |
After the Initial Spike
The first tick of a news reaction is often noisy and can reverse. Many experienced traders wait for the first few minutes of price action to settle before assessing whether a genuine trend has formed, rather than chasing the very first move.
Practical Checklist
- 1.Know the exact time of every scheduled high-impact release for your pairs.
- 2.Decide your approach — avoid, reduce, or trade the breakout — before the event, not during it.
- 3.Account for wider spreads and slippage explicitly in your risk calculations.
- 4.Let the first minutes of noise settle before judging the sustained direction.