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Spike Fadewhen the reaction outruns the surprise

Evidence: ModerateProfessionalNews · Mean reversion

Price adjustment to a release is concentrated in the first minute. Inside that minute, orders are filled at whatever is available rather than at anything considered — which is how a small surprise produces a move the size of a large one.

This page is the other side of the previous one. When the standardised surprise is under 1.0 but the spike is over two ATR, the move is liquidity rather than information, and it tends to come back.

It is also the most dangerous page in the book, because the setup for a fade and the setup for a genuine trend look identical for about ninety seconds.

Category
News · Mean reversion
Timeframe
M1 execution
Suitable pairs
EURUSD · USDJPY — deepest books, fastest recovery
Session
Second-tier US and European releases, where the surprise is usually small
Indicators / tools
Consensus forecast · standardised surprise · ATR(14) on M1 · live spread

Valid setup

NW-02 · SPIKE FADE — VALID SETUP EURUSD · M1 · surprise only −0.4, but the release candle ran over two ATR — liquidity, not information LONG 1.08428 1.08462 1.08496 1.08530 1.08564 1.08598 1.08632 BEFORE FIRST MINUTES — untradeable at any price THE BOOK REFILLS — 5 to 15 minutes BACK TO NORMAL back to the release open 1R TARGET = where the release candle opened ENTRY = close back a third of the spike SPIKE EXTREME STOP = beyond it + 0.2 × ATR 1 2 3 4 release +3 min 1.08598 1.08512 1.08458 1.08448 ① Second-tier release, not payrolls or CPI ② Surprise under 1.0, but the candle ran over 2 × ATR ③ Three candles pass — nothing is done inside the first minute ④ A candle closes back a third of the spike — enter ⑤ Out at once if a new extreme prints ⑥ Target the release open. Never past it

Exact rules

Entry

  • Both conditions, not either: standardised surprise below 1.0 in absolute terms, and the release candle's range above 2 × ATR(14) on M1.
  • That combination is the whole strategy. A large surprise with a large spike is not a fade — it is the previous page's trade in the other direction.
  • Wait for three M1 candles after the release. Do not act inside the first minute at any price.
  • Trigger: an M1 candle that closes back against the spike by more than a third of the release candle's range. Enter at that close.
  • Skip tier-one releases entirely — payrolls, CPI, rate decisions. Those move price because something changed.

Stop loss

  • Beyond the spike extreme, plus 0.2 × ATR(14).
  • If price makes a new extreme after entry, the move was information after all. Leave immediately; do not wait for the stop.
  • Risk 0.25% per trade. This is the smallest size in the library and it is deliberate.

Take profit / exit

  • The price where the release candle opened. That is the level the spike departed from and it is the whole thesis.
  • Not beyond it. Past the open you are trading the news in the other direction with no reason to.
  • Time exit fifteen minutes after entry.

Build Spike Fade

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More from News trading

Surprise-Scaled Reactionthe number against the forecast, not the numberLiquidity Recovery Entrylet the spread come back firstThe Pre-Release Straddlethe strategy the research argues against

Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.