A trader explains how he made $1.75 million using a news-driven futures strategy. When expected news hits the market, prices overshoot and then revert to fair value. He trades that reversion by entering on the initial move, then profiting as the price corrects back toward where it should have been.
made $1.75 million in profit. And this is the main theory behind the strategy. Fair pricing theory is mostly determined by news events. The way news impacts futures is by changing the fair price. There's 2 types of news: expected and then unexpected. You don't know what's going to come out. My favorite trade to take is the expected news reversion. If we have news coming out here at 8:30, price is coming in, you are going to see a huge candle coming off of news. Could be multiple in a row. It could just be one, but it's going to be a very large candle. This is already priced in and 90% of the time it's going to be very, very close to the forecast in a way where if there is an initial move, it is extremely unfair. So basically, if the outcome is extremely similar to forecast, then you can trade a reversion because this here is a fair price. So I'll use the exact same entry model just to trade these reversions.
