Event Driven Trading Masterclass

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What is Event Driven Trading

• Event driven trading offers many benefits to traders. It allows them to take advantage of news events and market movements that are often overlooked by other investors. It also provides an opportunity to capitalize on opportunities quickly, as event driven strategies focus on short-term trades. Additionally, traders can use event driven strategies to diversify their portfolios and reduce their risks. This is because event driven trading strategies are often less affected by market volatility than other strategies.Notable investors who have used event driven trading strategies include:
  • Warren Buffett – The Oracle of Omaha famously used event driven strategies to make a fortune in the stock market.
  • George Soros – The legendary investor made billions using event driven strategies.
  • Carl Icahn – The billionaire investor is a master of event driven trading.
  • Dan Loeb – The founder of Third Point LLC is an expert at event driven trading strategies.
  • Bill Ackman – The founder of Pershing Square Capital Management is an accomplished event driven investor.
• Market Analysis
  • Fundamental Analysis
    • Fundamental analysis can be used in conjunction with an event driven trading strategy to identify potential trading opportunities. Fundamental analysis involves analyzing macroeconomic and political events, such as changes in interest rates and political developments, to determine the likely direction of a currency. By combining this analysis with an event driven trading strategy, traders can spot potential trading opportunities before they occur. For instance, if a trader notices that a currency is responding to a market event in a predictable way, they can buy the currency in anticipation of the appreciation. This type of analysis is especially useful for identifying long-term trading opportunities.
  • Technical Analysis
    • Using technical analysis in conjunction with an event driven trading philosophy can help traders identify potential trading opportunities. Technical analysis involves the use of chart patterns, price movements, and other indicators to predict future price movements. By combining this type of analysis with an event driven trading strategy, traders can identify potential trading opportunities before they occur. For example, if a trader spots a chart pattern that suggests a currency is responding to a market event in a predicable way, they can buy the currency in anticipation of the appreciation. We call this a fundamental catalyst, and base our entire training around these patterns, using fundamentals AND technicals.
• Identifying Events
  • Economic News
    • Economic news can create a variety of forex trading opportunities. For example, when a country's central bank changes its interest rate, this can have a significant impact on the value of that country's currency. As a result, forex traders can use this information to their advantage, either by buying or selling the currency in anticipation of the rate change. Additionally, economic news such as employment numbers, trade balance figures, and inflation rates can also create trading opportunities. By closely monitoring the economic news of different countries, forex traders can spot potential opportunities to make profits.
  • Political Events
    • Political events such as elections, referendums, and other votes can create forex trading opportunities. For example, if a country's political landscape is uncertain, investors may be wary of investing in that country's currency. As a result, the currency may become undervalued. If the political situation changes and the currency becomes more attractive to investors, traders can take advantage of the situation by buying the currency and potentially making a profit. Political events can also cause currency devaluation, which can present profitable trading opportunities if the trader is able to identify the devaluation and take advantage of it.
  • Commodity prices
    • Commodity prices can create forex trading opportunities. When the price of a commodity such as oil or gold increases, the currency of the country that produces that commodity may also increase in value. As a result, traders can capitalize on this by buying the currency in anticipation of the price increase. Similarly, if the price of a commodity decreases, the currency of the country that produces the commodity may also decrease in value. This can present a profitable trading opportunity if the trader is able to identify the decrease in price and take advantage of it.
• Risk Management
  • Risk/Reward Ratios
  • Risk management is essential when it comes to event driven trading strategies. Traders must ensure that the potential rewards outweigh the risks associated with a given trade. This is done by calculating the risk/reward ratio. The risk/reward ratio is calculated by dividing the potential reward of a trade by the potential risk. The higher the risk/reward ratio, the more attractive the trade is. Traders should aim for a risk/reward ratio of at least 1:2, meaning that the potential reward is at least twice the potential risk. Additionally, traders should always use protective stops to minimize their losses if the trade moves against them.
  • Psychology
    • Trading psychology is an important aspect of event driven trading strategies. Traders must be able to manage their emotions in order to make sound trading decisions. Fear and greed can be two of the most powerful emotions when it comes to trading, and it is important that traders are able to recognize these emotions and make decisions accordingly. Additionally, traders should be disciplined and have a plan in place before entering a trade. This will help them stay focused and remain on track with their trading goals.
    • Event driven trading strategies can help traders manage their emotions and stay focused on their goals. By focusing on short-term trades and identifying potential opportunities quickly, traders can avoid the emotional pitfalls of longer-term trading. Additionally, event driven strategies can help traders diversify their portfolios and reduce their risk exposure. By mitigating the risks associated with trading, traders can stay calm and rational when making trading decisions. This can help them stay on track with their trading goals and avoid making rash decisions based on fear or greed.
  • Position Sizing
    • Position sizing is an important aspect of event driven trading strategies as it allows traders to manage their risk exposure. The outcome of some events are obscure, & should be traded as such, meanwhile, some events are extreme context rich, & well understood but still a great opportunity( Ex. The late reaction to the Euro collapse during the Russian Invasion of Ukraine). These events are considered high probability & could be traded with more certainty. By setting predetermined position sizes, traders can ensure that they are not overexposing themselves to risk. Additionally, traders can use position sizing to diversify their portfolios and reduce their risk exposure. By diversifying their portfolios, traders can reduce the effect of any single event on their trading results. By setting predetermined position sizes, traders can also ensure that they are taking advantage of the most attractive trading opportunities. This is because the position size will be based on the potential reward and risk associated with the trade.
• Trading Strategies
  • Entry and Exit Points
  • Stop Losses and Take Profits
  • Trailing Stops
• Money Management
  • Leverage and Margin
  • Risk Allocation
• Common Mistakes
  • Over-Trading
  • Poor Risk Management
  • Lack of Preparation