What to Do When Big News Hits While You Hold a Trade

Many traders have been here. You open a EURUSD trade in the afternoon as planned, and when the chart starts moving your way it feels good. Then ten minutes later you notice the NFP figure is about to be released. The question comes straight away: close the trade, hold it, or move your stop loss? High-impact news is when price can move dozens of pips within seconds, and it is when many accounts suffer their worst damage of the month. This article explains what really happens to your orders during news, what options you have before the release, and how to use your own trading statistics to decide which one to choose.

What is high-impact news, and why does price move so abnormally?

High-impact news is economic data that the market is watching closely and that affects expectations for interest rate policy. Common examples in the forex market include:

• Non-Farm Payrolls (NFP), the US employment figures, released on the first Friday of every month
• CPI, the inflation figures, which directly affect the direction of interest rates
• FOMC, ECB, BOE and BOJ meetings and the central bank governors' press conferences
• GDP and retail sales of the major economies

Before the release, market liquidity falls because large liquidity providers pull their orders to avoid risk. When the actual figure differs from what the market expected, a large number of orders arrive at the same time in a thinner market, so price jumps instead of flowing continuously.

What really happens to your orders during news

Many people think that having a stop loss means they are safe, but during news three things can make the result differ from the plan.

1. Spreads widen several times over

A pair that normally has a 1 pip spread may stretch to 5-15 pips at the moment the news is released. If your stop loss is very close to price, it can be hit by the spread alone, even though the mid-price chart never touched that level.

2. Slippage makes the loss larger than planned

A stop loss is an order that is sent to the market once price touches it, but if price jumps past that level, the order is filled at the next price actually available. The result is a loss larger than you calculated. To understand this mechanism in more detail, read our article on slippage and how to reduce its impact on profit

3. Margin tightens immediately

When the spread widens, equity falls immediately even though the real price has not moved. An account that is already using a lot of margin may have its positions closed out during that period.

A worked example: what does a 2% planned risk become?

Suppose a 5,000 dollar account opens 0.5 lot of EURUSD with a 20 pip stop loss. The planned risk is 20 x 5 = 100 dollars, or 2% of capital.

The CPI release comes out stronger than expected. Price jumps a further 18 pips past the stop loss before the order is filled, and the spread at that moment is 6 pips. The actual loss is therefore about 20 + 18 + 6 = 44 pips, or roughly 220 dollars, which is 4.4% of capital, more than double the original plan.

If this happens just once a month, over a year you will accumulate excess losses that were never part of the plan. This is why some systems look good in a backtest but do not behave the same way in live trading.

Before the news: 4 options to decide in advance

The most important thing is to decide before the news time, not while the chart is spiking. The main options are:

1. Close all trades before the news. This suits short-term traders with tight stop losses. The downside is that you may miss profit if price runs in the same direction as your trade.
2. Close part of the position to lock in profit. If the trade is already in profit, closing half reduces the damage if the news pushes price against you, while still letting the other half run.
3. Hold, but reduce your risk size from the start. If your system is a swing system and you expect to hold through news anyway, calculate your lot size allowing for slippage, for example by adding another 50% to the stop loss distance when sizing the trade. For how to calculate this, see the Position Sizing guide
4. Do not open new trades within 15-30 minutes before and after the news. This is a simple rule that removes a lot of unnecessary risk.

No single option is right for everyone, but the worst option is having no rules at all and deciding on emotion every time.

While the news is released: what not to do

• Moving your stop loss further away because you are afraid of being hit. This makes your real risk higher than intended and often ends in a large loss. There are more details in our article on adjusting your stop loss during a trade
• Chasing price on the first candle after the news. The first candle usually has a wide spread and price often retraces partly. Chasing it then means accepting the highest cost of the day.
• Removing your stop loss. Many accounts have been wiped out in a single night because of this decision.
• Watching the chart every second. The closer you watch, the more likely you are to act on impulse instead of the plan.

Use your own statistics to answer whether news helps or hurts you

General advice can only be broad. The most accurate answer is in your own trading history. Try these steps:

1. Tag every trade opened or closed within 30 minutes before and after high-impact news in your trading journal. If you do not yet have a journal system, you can start with our guide to recording every trade in a journal
2. Separate the comparison groups: trades around news versus trades in normal periods. Look at the win rate, average loss and profit factor of each group.
3. Look at the excess loss from slippage. Compare the actual loss with the loss that should have occurred according to your stop loss. If the news group often loses more than planned, you are paying too much for news.
4. Look at your top 5 worst trades. If more than half happened on days with high-impact news, that is a clear sign you need a stricter news rule.

On Thaifxbook, statistics from your MT5 account are recorded automatically, including drawdown, profit factor and your past trade list. You can therefore look back at how often your equity curve stumbles on the first Friday of the month or on FOMC meeting days, instead of relying on a feeling that news causes your losses.

Quite a few traders find that once they remove trades around news, their system's profit factor improves immediately, without changing the strategy at all.

Conclusion

Big news is not dangerous only because price moves fast. It is dangerous because of wider spreads, slippage that stops your stop loss working as planned, and emotional decisions made within a few seconds. A good approach is to check the economic calendar every morning, set rules in advance on whether to close, reduce or hold trades through news, calculate your lot size allowing for slippage, and, most importantly, use your own trading statistics to check whether those rules really work. Once you know in numbers how much news affects your portfolio, your next decision will rely more on data and less on fear.