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Mario Draghi- When He Speaks, The Euro Moves

OCTOBER  2019- FARWELL OH DEAR DRAGHI!

(This post is a tribute to Mario Draghi, who retired as the President ( 2011- 2019) of the ECB (European Central Bank) and of course also an educational post for our ever awesome traders/budding traders like you, so... thank you! ). Let's begin!

 ECB Press release day:

 I patiently wait to see the man in action! πŸ˜… Rarely, you can say this about anyone in this world.

I shall miss you Draghi and I cannot believe I just said that!

Note: The current ECB President (Madame President or Her Excellency) is Christine Lagarde November 2019 onwards. 

Now back to Draghi, ECB conference and trading the EURUSD.


The big bold disclaimer: It will also be wise to mention here that trading the news is highly RISKY as markets are volatile during the said period. 


Mario Draghi could be speaking in Chinese, French or Italian. You don't need to understand it (if you have just started trading)  but when he speaks, the markets move. The Euro especially!

Well, not just me, I guess the entire financial world waits for him to speak in front of the press thus giving us an opportunity to...well.. press the button to trade.

 Unlike other central bank heads of the world, ECB faces the press 10 times a year (pretty brave I must say as the press conference lasts more than 30 minutes and the journalists have a field day grilling him). 

The President of the ECB chairs the Governing Council meetings in much the same way as the Chairman of the Fed's Board of Governors chairs the meeting of the Federal Open Market Committee (FOMC).

Who is Mario Draghi, I hear you ask?

For the world he is

  • An Italian Economist
  • 8th Most Powerful Person On This Planet (Forbes)
  • Former Governor of the Bank of Italy
  • President of the European Central Bank
  • The world's second greatest leader. (Fortune Magazine)
  • Ex Goldman Sachs employee (wait, do I need to mention that)

But to me, he is the man  who helps us traders make moolah. 

(More on that later. Keep going!)

ah.. and sometimes we get entertained at his expense too.

See the video below.

This happened in broad daylight in front of the world just as we were getting ready to place our trades.  Watch this 37 seconds video "Blink And Miss Moment" !

 

It was a very Hollywood moment wasn't it ...with papers flying off hand while a woman literally dove into his arms (read face).

I mean who attacks  with confetti!

But then, where else can you get to see a 70 plus year-old man getting attacked by a young German girl while the financial world watches it LIVE on television !

I mean.., give the man some grace. At least he wasn't rude or swearing at the protestor.

Rather Italian Mambo was still calm and composed after his initial reflex action. He handled the situation in a very dignified manner and continued with his job of delivering his speech  thereafter.

 So what does he speak on?

  • On the latest policy changes (European Central Bank)
  • Forecast on things they intend to do.
  • Interest Rates (Most Important).

What is ECB?

Thank you. I will answer that too.

  • ECB  or the European Central Bank is the most important financial institution in Europe.
  • It is the central bank of the 19 European Union countries which have adopted the euro.
  • Its main task is to maintain price stability in the euro area and aim to preserve the purchasing power of the euro.
  • It is the central power hub of Europe.
  • They define and implement monetary policy for the euro
  • Their main aim is to maintain price stability, i.e. to safeguard the value of the euro.
  • Price stability is essential for economic growth and job creation – two of the European Union’s objectives – and it represents the most important contribution monetary policy can make in that area

The only drawback is that it is responsible for controlling inflation and not responsible for the overall growth of the economy, unlike the Fed in the United States is responsible for both.

Do you want to know who did that to ECB? Ah... The Germans! 

Du Hast mich...Nein (You have me. NOooo!) .

They took it so seriously that Rammstein wrote a song on it. OK. that was a joke but there is a song called Du Hast.

I digress!

Now coming to why I love him speak?

Euro can  move up to 100 pips a day.

On days when Draghi speaks. it moves up to 200 pips. 

Told you, the man is magic. which means.. more trading opportunity for us traders. 

This kind of trading is called... TRADING THE NEWS!

Disclaimer- It is not for light-hearted people.

In less than a minute, the currency can move up to 50 pips . ( usually, it can take any time from an hour to a day for a currency to move that many pips).

The ECB Press Conference In Action.25th January 2018.

Spoiler alert: Its an hour long video. I don't except you watch this but this is what a typical ECB meeting comprises of. Click here.

 

And now for the interesting bit....

 How To Trade The Euro during the ECB Press Conference

Again.. Disclaimer: I don't trade the news anymore but I used to. 

πŸ‘‰ News is out usually at 1.30pm BST. (Happens once a month).

πŸ‘‰The first 15 minutes is the knee jerk news.. meaning Draghi might say something positive or negative which might make the market (EUR/USD ) flow the wrong way. It could be of great danger to you if you chase that move, Besides it happens so fast that you can forget a toilet break!

 πŸ‘‰Wait till he finishes his speech and for the  Q&A session starts.  Often in the Q&A session , he can something that could be the opposite of what he said in the speech, so watch out for that.

 πŸ‘‰Wait for 30 minutes to an hour after he starts speaking. This gives you a better idea if his speech has made a positive or negative impact on the market. It will give you a clearer picture.

πŸ‘‰ Often after this period, the market reverses (it's called correction).

πŸ‘‰ Trading the correction: If it reverses, then most traders goes with that move.

πŸ‘‰ Correction takes place anywhere from 10-50 pips.

Trading Example- 

 April 26th, 2018. Forex Factory Calendar. ECB Press Release News. Market Moves.  Here is the detail video.

Trading Tip:  Backtest if this works.

  • Open your charts and check the ECB press conference dates on Forexfactory and see if it holds true.
  • The market has a pattern of doing things. The more you backtest, the confident you will be in trading the market. I would love to hear your findings on it.

 Happy Trading

Sanchaita 

DISCLAIMER and Risk Warning: : Forex Trading is risky. 78% of Forex traders lose their money. Data and information provided here is solely for educational and information purposes . Past performance of any trading system. technique, methodology is not necessarily indicative of future results. Please ensure you fully understand the risks involved and seek independent financial advice if necessary. Do not trade with money you can't afford to lose. Investing /Trading in FX, Forex, Futures, Stocks, Options, Spread Betting, CFD's and other financial instruments carry a high level of risk to you capital and can result in losses exceeding your deposit. While these techniques and our trainings can make you successful without having existing experience, this is not an employment opportunity. It is NOT a way to create wealth without work. 

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