Event-Driven Catalyst Trading

No, selective event trading is key. Trade only: 1) Major events with clear market-moving potential (US Fed, PBOC, BOJ, MAS, Singapore Budget, major earnings). 2) Events where you have preparation and understanding. 3) When risk-reward is favourable. Avoid: minor events, events you don't understand, events with unclear binary outcomes, events when you lack time to monitor (including overnight night-session catalysts). Quality over quantity - missing events is fine. Better to trade 5 events well per year than force trades on 20 events with mixed results.

Sources for consensus expectations: 1) Reuters/Bloomberg polls for Fed, BOJ and PBOC expectations. 2) Analyst estimates for earnings (TSMC, the Singapore banks, broker reports). 3) Economic calendars show consensus forecasts. 4) Pre-event price action - if the market rallied into the event, a positive outcome is expected. 5) Options pricing - high IV indicates an expected large move. 6) Business news channels discuss expectations before major events. Build a habit of checking these sources 1-2 days before major events.

Missing the initial move is often better than getting whipsawed. Options after missing: 1) Wait for a pullback - after the initial spike, price often retraces 30-50% before continuing. Enter on the pullback. 2) Trade continuation - if direction persists for 1-2 hours, it often continues for the rest of the session. Join later in the trend. 3) Trade the next session - event impact often continues for 2-3 days. Entries aren't only at the announcement. 4) Skip it - if the move is extended, don't chase. Wait for the next opportunity. Never chase extended moves out of FOMO.

Global linkages: 1) The US Fed affects global liquidity - a hawkish Fed means less global capital, which pressures Asian and emerging markets. 2) Foreign investors are major participants in these markets and react to global events. 3) SGX index futures trade through the US hours in the T+1 night session, so the reaction is live - there is no separate proxy contract. 4) Currencies move - USD/CNH (A50), USD/JPY (Nikkei) and USD/SGD (SiMSCI) all respond to the Fed. 5) Risk-on/risk-off flows - a global risk-off hurts Asian equities regardless of local factors. Watch the US session and the night-session price action directly.

On SGX, 'overnight' is nuanced because index futures trade through the night session - the bigger gap risks are the handover between the night-session close (~5:15 AM SGT) and the T-session reopen, the staggered Asian cash-market opens, and weekends. Guidelines: 1) Reduce size if holding across these (50% of normal). 2) Use protective options for significant size. 3) Check the overnight calendar (FOMC, US data). 4) Have a gap scenario plan for each cash open. 5) For major set-piece events (Singapore Budget, China Two Sessions), consider being flat over the riskiest windows. Safe approach: reduce exposure during event-heavy periods and rebuild post-event when clarity emerges.

Sell the news occurs when price rallies into an event and falls after a positive outcome (or vice versa). Identification: 1) Strong pre-event rally (market positioned for good news). 2) 'Good' news delivered but the reaction is muted or negative. 3) Volume selling despite a positive headline. Trading: wait for confirmation - the initial reaction might be positive. If price fails to hold/extend gains within 30-60 minutes, it's sell the news. Enter the fade with a stop above the initial spike high. Target: pre-event levels. Key: don't anticipate sell the news - wait for the market to show it's selling.

Whipsaws (quick moves in both directions) are common during events. Handling: 1) Don't trade the first 5-15 minutes when whipsaws are most common. 2) Use wider stops to survive initial noise. 3) Enter only after direction stabilizes (lower highs/higher lows established). 4) Accept some whipsaw losses as a cost of business. 5) If stopped out on a whipsaw, reassess - don't immediately re-enter emotionally. 6) Position sizing matters - smaller positions survive whipsaws better. Key mindset: the first move can be the wrong move. Patience is your edge over algorithmic traders who react instantly.

Sector earnings approach: 1) Identify the bellwether - the first reporter often sets the tone (TSMC for semiconductors, the first of DBS/OCBC/UOB for Singapore banks). 2) Trade the bellwether reaction - most liquid, clearest signal. 3) Use the bellwether result for sector positioning - if TSMC disappoints, expect weakness in other tech names. 4) Position in other names before their results based on the bellwether signal. 5) But be aware: later reporters can deviate if their specific situation differs. 6) Track the index futures (FTSE Taiwan for tech, SiMSCI for the banks) for aggregate positioning. Strategy: trade the bellwether directly, use the information for sector positioning.

Scale strategy to event importance: Tier 1 events (US Fed, PBOC, BOJ, MAS, Singapore Budget): full preparation, reduced position size, wide stops, primary trading focus. Tier 2 events (TSMC and bank earnings, China GDP/PMI, Japan Tankan): moderate preparation, normal position size, attend to but don't obsess. Tier 3 events (minor data releases, sector-specific news): awareness only, normal trading with adjustment if significant deviation. Position sizing: Tier 1 events - 50-75% size (highest uncertainty). Tier 2 - 75-100% size. Tier 3 - 100% size with quick adjustment. Targets: scale expected move to event importance.

Singapore has no single domestic volatility index, so use the CBOE VIX (the global gauge, which drives the night session) and the Nikkei VI for Japan. 1) A pre-event VIX rise indicates the market is bracing for uncertainty - high VIX means expect a large move, use wider stops. 2) A post-event VIX drop (volatility crush) is common once uncertainty resolves. 3) If VIX doesn't drop post-event, the market is still uncertain - be cautious. 4) Extreme VIX (>25) indicates regime stress - events can cascade, so reduce all exposure. 5) Use VIX for position sizing - higher VIX = smaller positions. 6) Divergence: if VIX rises but the market doesn't fall, it is often a bullish setup. Track VIX/Nikkei VI as an event-sentiment indicator.

Resource-efficient system: 1) News alerts: set Google Alerts and social alerts for key terms (Fed, PBOC, BOJ, TSMC, DBS). Free. 2) Data feed: use broker notifications and reputable channels for real-time event updates. 3) Spreadsheet model: build a template with event scenarios, expected moves and position calculations. Pre-populate before events. 4) Order preparation: create bracket orders with entry, stop and target in advance. Stage but don't activate. 5) Communication: join trading communities where events are discussed in real time. 6) Review system: document every event trade for pattern learning. A low-tech but systematic approach beats ad-hoc sophisticated tools.

Portfolio allocation framework: 1) Core strategy allocation: 60-70% to systematic strategies (trend, range, VWAP). 2) Event allocation: 15-25% reserved for event opportunities. 3) Cash buffer: 10-15% always available for unexpected opportunities. Event capital management: don't deploy the full event allocation on a single event. Spread across 4-6 events per month. Never let event-trade losses exceed the monthly event budget. Integration: event trades complement core strategies - events break ranges (transition to trend) and create trends (core strategies continue). Avoid overlap: don't hold a core position and an event position on the same instrument unless intentional scaling.

Successful event-trader traits: 1) Preparation discipline: thorough pre-event research every time, no shortcuts. 2) Emotional control: events are emotional - successful traders don't chase, panic or freeze. 3) Quick analysis: can assess outcome vs expectations within minutes. 4) Scenario planning: have plans for all scenarios, not just the expected outcome. 5) Position-sizing discipline: never oversize event trades despite conviction. 6) Accept misses: comfortable missing moves rather than forcing trades. 7) Learning orientation: document and review every event trade. 8) Information edge: develop superior sources and faster interpretation. 9) Patience: wait for high-quality setups, don't trade every event. 10) Realistic expectations: accept a 55-60% win rate and focus on positive expectancy.

Institutional advantages: 1) Speed: co-located servers, direct feeds, sub-millisecond reaction. 2) Information: expensive terminals, analyst access, sometimes earlier information. 3) Size: can move markets, better fills on large orders. 4) Resources: dedicated teams for different event types. Retail can compete by: 1) Patience: wait for post-event clarity where human judgment matters. 2) Flexibility: no bureaucracy, can trade opportunistically. 3) Specialization: focus on a few events you understand deeply. 4) Lower expectations: retail doesn't need to beat a benchmark, just make money. 5) Longer timeframe: institutions often must trade immediately; retail can wait days. 6) Fewer constraints: no internal risk limits or reporting. Use retail flexibility as an advantage against institutional speed.

Holding period framework by event type: 1) Intraday events (TSMC monthly sales, data releases): the primary move is captured in 2-4 hours. Exit same day unless a clear multi-day thesis. 2) Major events (Singapore Budget, China Two Sessions): impact can last 2-5 days. Consider holding if direction is confirmed, with a trailing stop. 3) Global events (Fed, geopolitical): the initial night-session move is short-term, but the theme can persist for weeks. 4) Guidance: take 50% profit within the first 2 hours (capture the immediate move), let 50% run with a trailing stop for continuation. 5) Red flags to exit early: momentum stalling, volume declining, reversal patterns forming, VIX behaviour diverging. Default: intraday exit unless there is a specific reason to hold. Holding across the session handover or a weekend requires conviction and reduced size.