Around a central bank decision, do you widen stops, cut position size or step aside completely?
In one week the Federal Reserve raised rates, the Bank of England held on a split vote and the Bank of Japan raised rates (Fed, Bank of England, Bank of Japan). On Thursday 24 September the Swiss National Bank, Norges Bank and the Riksbank all announce decisions.
The SNB has a history of surprising markets. On 15 January 2015 it abruptly dropped its minimum exchange rate of 1.20 francs per euro, and the franc jumped within minutes. That episode is one reason many brokers raise margin requirements on franc pairs around SNB announcements (SNB preview).
Traders handle event risk in very different ways, and there is no single right answer. We would like members to describe theirs.
- Do you have a fixed rule for the hours around a decision, or do you decide case by case?
- Do you widen stops, cut position size, close trades before the announcement, or stay away from the pair entirely?
- Do you trade the release itself, or wait for the market to settle and the press conference to finish?
- Have you seen slippage or a broker margin change around an announcement, and how did you find out?
Some members will say the answer depends on the pair and the central bank, so tell us which ones you mean. Position sizing covers how to keep the risk per trade fixed while conditions change.
Please share your own approach and what it has cost or saved you. Posts that promise a direction or sell signals will be removed.
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