Straddle trading is simply a method of placing two pending orders, a buy stop above the current price of a currency pair and a sell stop below the current price of a currency pair.
Traders use this method when they anticipate the continuation of current price movement or trend, or to take advantage of quick spikes in price at the release of news information.
The basic concept of straddle trading is very straightforward – you wait for price to consolidate into a tight range (as it usually does before news releases), then you place a pending buy order just above the range and a pending sell order just below the range and you wait for one of them to trigger when the price breaks out of the range. The idea is that price will move sharply in one direction when the news is releases and because you have pending orders in both directions, you will make a profit no matter which direction the breakout occurred to.
This sounds like a great strategy in theory, but unfortunately it’s never that simple in practice. The biggest problem with this strategy is the false breakout, where the price breaks out slightly in one direction to trigger your trade and then suddenly reverses and breaks out in the other direction. This happens way too often and it’s usually the downfall of straddle trading strategies. In the case of news releases, false breakouts usually occur because you either placed the pending orders too soon (ie. not close enough to the release of the news) or because the news release did not have enough of an impact on the market to cause a sharp move in the currency.
The latter occurs when the figures that are released are very close to what’s expected, for example – if all the analysis’s expect the unemployment figures to be x and the actual released figure is x, then there’s no major impact on the currencies, but if the released figures are dramatically different to what the analysis expected, it usually results in sharp movements (or corrections) in the currencies. The ideal is to straddle the market when the variance between the expected and the actual figures is big enough to cause strong spikes in the charts, but unfortunately this all happens way too quickly for the manual trader.
The StraddleTrader Pro system was developed to help reduce some of the issues associated with the straddle method.
Read Straddle Trader Pro Review Here6
Straddle Trader Pro Review – All Straddle Trader Pro Information At One Place