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This week in Trump: Where’s the trading opportunity?

October 05, 2018
BY Emma Richards

Every Friday, we go through all of Trump’s tweets over the past seven days to see how the leader of the free world has moved the currency markets.

This week, we look at his enthusiastic endorsement of the new United States-Mexico-Canada Agreement (USMCA) and analyse the impact it had on the USDCAD.

Trump’s tweet of the week:

Trump tweets on the USMCA deal. Which resulted in a strong CAD.

When it comes to short-term trading opportunities, we will look at two areas: volatility and opportunity.

Volatility: This tweet resulted in average true range (ATR) rising strongly. The ATR measures how much price moves on average. In an upwards movement, the ATR measures the difference between the close of the previous position and the next high of a candlestick.

Opportunity: Trump’s approval of the North American trade agreement was good news for the Canada dollar (CAD). Traders who follow Trump closely, and were quick enough to interpret the news, could have seized the opportunity to sell US dollars against Canadian. Within five minutes of Trump tweeting, the CAD strengthened and the USDCAD dropped sharply and continued to fall over a 15-minute period.

The markets reacts to Trump's tweet on the free trade deal

The US has never had a president who makes so many public announcements on the markets. Click here for your complete strategy guide to trading based on Trump’s Twitter.


Trading next week: 8 – 12 October 2018

We cannot forecast when and what Trump will tweet, but we can see that his social media announcements really do move market prices.

To trade based on American economic policies the smart trader could consider setting trailing stops. The trailing stop is a type of order that moves dynamically when the price trends in a profitable direction, and stop moving once the price moves in an unfavourable direction.


How to predict when the price is going to change direction?

A popular stop loss indicator is the Parabolic Sar. This technical indicator is used to establish what direction a currency pair is moving in, and alert the trader when the price direction could potentially change.

We can see in the pictures below how the Parabolic Sar would have captured a good amount of profit of the bearish spike of the USDCAD.

Settings used for the Parabolic Sar in this example are:

  • Start: 0.03
  • Increment: 0.03
  • Max: 0.3

We used these settings because they are more reactive to the highly volatile nature of price movements in the aftermath of a big, unexpected announcement — like Trump’s tweets.

Parabolic SAR technical indicator captures price movements

The Parabolic SAR technical indicator is an effective tool for tracking probable price movements. Use it to alert you to unfavourable changes in the price direction.

Interested in learning more about how trailing stops can ensure you maximise your orders? Read the full guide to using the Parabolic Sar in currency trader here.

Following Trump’s Twitter account should be a key part of your trading strategy. Now put it into practice. Sign-up or login to your FREE Exness account and you can begin trading today.

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