How do you trade the expectations game?

Markets don't react to data; they react to data minus expectations. The trade is in the gap between the two — and the gap is knowable in advance.

How do you trade the expectations game? — risk-reward diagram
A risk-reward ratio of 1 to 2

What's your method?

  • how you measure expectations before a release
  • how you position for the surprise rather than the number
  • the expectations gap you exploited or got burned by
How do you trade the expectations game? — candlestick anatomy diagram
The parts of a candlestick: wick, body, open and close

Background: how to read an economic calendar covers the forecast column.

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