Forex Catastrophe – Straddle Trading Whiplash
Another variation on the currency trading consolidation breakout in the forex is a whiplash, which occurs when two forex fundamental announcements that have the opposite effect are released consecutively. The whiplash is a radical unexpected price movement that makes forex trading very dangerous.
The forex market first breaks out of consolidation after hearing the news from the first fundamental announcement, then turns to break out on the other end of consolidation after hearing the news from the second fundamental announcement.
After the whipsaw, the market returns to consolidation. The forex trading market will eventually either break out in response to another fundamental announcement or move in the direction of the pre-consolidation trend.
If you were actively forex trading during this time and set up a straddle trade when the market whipsawed, you would be locked in a loss where the loss equaled the size of the consolidation range (plus 10-15 pips on either side) because your buy and sell orders were both filled.
Rules for Straddle Forex Trading
Follow the rules for trading a consolidation and a breakout (straddle trading):
- Find consolidation in a tight forex trading range (20-60 pips for at least 6 hours).
- Check for upcoming fundamental announcements (at fx360.com’s economic calendar)
- Find resistance and support and set your straddle orders 15 minutes before the fundamental announcement is scheduled.
- Practice sound money management. If the consolidation range is more than 60 pips there may be too much potential risk in the trade (too much money to be lost between entry and stop loss should the trade not work out).
- Create a trading plan. Trade the plan. In this case, specifically, make a plan for what you will do if prices do not break out of the consolidation (you fall into a bull or bear trap or prices whipsaw).
If you’re going to use a straddle in your forex trading, you’re eventually going to get forex whiplash. By following the rules listed above, hopefully it won’t sting too bad 
I’ll be covering more examples of forex straddle trades for you to make explosive profits with your forex trading!
Related posts:
- Currency Trading Price Consolidation Breakouts
- Is the Forex Moody? Trading & Trending Days
- Trading Forex on a Trading Day
Tags: breakout, consolidation, forex trading, Fundamental Announcements, straddle trade, whiplash Posted in
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April 29th, 2010 at 2:01 pm
hey Brian! I have a very novice cuestion, you are saying that a breakout of consolidation comes from a news release?, because right now in the actual markets there are a lot of currencies that have been in a consolidation range for quite long ( many of this currencies are even “compressing” their price movement to a shorter range as they move forward)so you think that only a news release will have the enough power to break it?, or it could be a slowly but steady economic recovery for a currency, the one that can unleash a breakout?
sorry for my grammar, english is not my first language
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Rapid Forex
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April 29th, 2010 at 2:02 pm
@Fracisco – fundamental announcements don’t always cause breakouts, but breakouts are often caused by these type of announcements. The reason I avoid them is because we never know “when” the surprise is going to happen. You could ignore this aspect, but I’ve got better results by avoiding these trades.
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May 29th, 2010 at 12:45 am
I really like the course.
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August 9th, 2010 at 7:36 am
Hi Brian,
I want to thank you for all the wonderful information you have provided. This has totally TRANSFORMED my trading. I’m now profitable and able to trade calmly and with confidence, thanks to your many videos, the Market Snapshot and the Fibonacci Calculator. Bless you for helping all of us! I had been trading–at a loss–for seven years. Since using your methods starting on July 2nd, I have traded up 62% on my demo account. I’m planning to start trading real money very soon.
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Rapid Forex
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August 10th, 2010 at 8:15 pm
@Dahlia – thank you for sharing this! I’m totally excited to see that the information on this website has helped you be a better trader. This website is a labor of love for me & your comment adds fuel to the fire to keep it going!
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