Five Minutes to a Major Release With a Position Open

[Fairman]

Five Minutes to a Major Release With a Position Open

Situation: you hold 0.50 lots long on EUR/USD, entered at 1.1000 with a stop at 1.0980, a 20-pip risk worth 100 dollars. US inflation data is due in five minutes. Price is at 1.1015, 15 pips in profit.

Consider each choice. Option one: do nothing. If the data surprises and price spikes down 60 pips in seconds, the stop may fill at 1.0950, a 50-pip loss on entry, which is 250 dollars, 2.5 times the planned risk. Spreads may also widen to 5 pips, triggering the stop sooner.

Option two: move the stop to breakeven. In the spike, it might fill at 1.0990 or lower, the loss shrinking relative to the original. But a spread widening could trigger it unnecessarily before the move.

Option three: close the position, locking in about 15 pips, 75 dollars. You give up potential gains if the data is favorable.

Option four: reduce to half. Keep exposure of 0.25 lots, with the stop in place. The worst case with slippage becomes about 125 dollars.

What does the plan say? A news rule, written in advance, removes the dilemma: for example, no positions larger than 0.25 lots within 15 minutes of high-impact events involving the pair's currencies, or no holding tight stops.

The decision depends on whether the setup's edge extends through news. For most swing traders, it does not, and closing or reducing is appropriate.

Exercise: write your own rule for open positions before scheduled releases.