Nick Goold
What Is the TACO Trade?
The “TACO trade” stands for “Trump Always Chickens Out.” It’s a nickname traders use to describe a common pattern: President Trump threatens to add big tariffs, markets panic and fall, but then he changes his mind or delays the decision—and markets bounce back.
This creates an opportunity for traders to buy when prices drop and sell when they rise again.
Example – May 2025 EU Tariff Situation
On Friday, May 23, 2025, President Trump announced a 50% tariff on goods from the European Union, saying it would start on June 1.
Markets dropped quickly:
Dow Jones fell 0.95%, USD/JPY dropped 0.97%, Gold jumped 2%
But just two days later, on Sunday, May 25, after talking with the European Commission President, President Trump said he would delay the tariff and continue negotiations.
Markets reacted fast:
May 26: Dow +1.15%, USD/JPY +0.3%, Gold -0.4%
May 27: Dow +0.8%, USD/JPY +1.1%, Gold -1.3%
This is the TACO trade in action: big fear first, then relief. Traders who bought during the panic had the chance to make strong short-term gains.
Why the TACO Trade Matters
This kind of setup is rare—it gives traders a chance to make profits from repeatable market behavior caused by political news.
In markets that usually move slowly, these sharp up-and-down reactions offer quick opportunities. TACO trades work because they follow a pattern, not a prediction. Good traders look for patterns that repeat, rather than trying to guess the future.
These trades work best in:
- FX pairs like USD/JPY, EUR/USD, and AUD/USD
- Gold, which rises when traders panic and falls when fear fades
- Stock indexes and individual stocks that are sensitive to global trade (like tech or exporters)
If you can spot the pattern early and manage your risk well, TACO trades can be a strong short-term strategy—even in uncertain markets.
How to Trade the TACO Setup
1. Watch the News Closely
Most tariff headlines come late in the U.S. trading day or on weekends. Be ready to act quickly.
2. Understand the Pattern
Tariff threat → Stocks fall, USD/JPY falls, and gold goes up
Trump backs down → USD/JPY rises, gold drops, and stocks rebound
3. Use Technical Analysis
Look to buy near important support levels. Wait for the market to start rising before you enter. Be patient and don’t rush in during the panic. Let the price show signs of turning first.
4. Always Use a Stop-Loss
News-based trades move fast. If the news goes the other way, a stop-loss protects you from large losses.
5. Use at Least 2:1 Risk-Reward
If your stop-loss is 50 pips, aim for at least 100 pips in profit. This way, even if you’re right only 4 out of 10 times, you can still make money over time.
Why Pros Go Against the Crowd
Professional traders often go against the crowd, especially when the news looks bad. That’s because many people overreact, and those overreactions can create great entry points. In TACO trades, the scariest moment—right after a big tariff announcement—is often when the market is ready to bounce back. If you wait for signs that the market is turning and use a stop-loss, you can take advantage of the crowd's fear.
Pros don’t just trade based on headlines—they look for patterns in crowd behavior. They know that most traders react emotionally, so they study how the market responds over and over in similar situations. This helps them build strategies that are based on behavior, not guesses. All traders—should focus on this mindset. Don’t try to predict the future. Instead, study the market for patterns that repeat. This approach is more reliable, more consistent, and it’s how professionals stay profitable in the long run.
What Happens When Too Many People Use It?
Like any trading idea, the TACO trade gets weaker when too many traders use it. Recently, even when a U.S. court blocked President Trump’s tariffs, the S&P 500 only rose 0.4%. That’s a sign the market may be getting tired of reacting to the same news.
Some fund managers now say the TACO trade has become background noise, and its power to move markets may be fading. When everyone expects the same thing, markets often stop reacting.
What Is Trump Really Doing?
President Trump’s trade threats seem more about looking strong than making big changes. His goals often include:
- Looking tough in negotiations
- Avoiding big drops in the stock market
- Keeping the U.S. dollar weaker to help exports
- Making the economy look strong for voters and headlines
This pattern of behavior made the TACO trade work in the past. But it only works if people still believe he’ll back down when needed. The TACO trade has been a smart way to profit from President Trump’s market behavior. But now that more traders know about it, the easy profits may be harder to get.
Learn from the Pros: Track What Big Traders Are Doing
Titan FX offers a powerful tool in the Research Hub called IMM Currency Futures Positions and CFTC Commitment of Traders Report Analysis. You can open this tool from the Market Analysis menu in the Titan FX Research Hub or the link below:
Access the IMM Currency Futures Positions and CFTC Commitment of Traders Report Analysis
This tool helps you trade like the pros by showing how the biggest traders in the world are positioned—and how they’re changing their trades each week. Watching this data can help you spot strong trends or signs of a potential reversal when markets become too one-sided.
IMM Currency Futures and CFTC Trader Data
The CFTC (U.S. Commodity Futures Trading Commission) releases a report called the Commitments of Traders (COT) every week, usually late Friday U.S. time. It shows how different trader types—especially large funds—are positioned in futures markets.
The most useful info for traders is from Non-Commercial positions, which show what big speculators and funds are doing.
Titan FX makes this data simple to understand:
- A bar chart comparing long vs. short positions
- Long positions (buyers) in red
- Short positions (sellers) in blue
- Net position (longs minus shorts) shown with a line
- Weekly changes in each category
- Click "See more" to dig deeper into any asset.
When you open the tool, the first screen shows a simple bar chart for each asset. You can clearly compare how many long (buy) and short (sell) positions big traders are holding. Below the chart, you’ll see the weekly changes—how many new long or short contracts were added or closed. You also see the total number of long, short, and net positions. This gives you a quick look at what direction the big players are leaning toward.
Long-Term Positioning Charts
Clicking "See more" opens a second page that shows historical trader positions and price charts side by side. This helps you see how trader sentiment changes before, during, and after major moves.
You’ll see a bar chart with red (long) and blue (short) bars, a black line for the net position (longs minus shorts), and a green line showing price. This helps you see how sentiment and price have moved together—or against each other—over time.
You also get a table with weekly data, so you can track changes week by week. You can explore data going back over 20 years, which helps you:
- Compare price moves to trader behavior
- Spot patterns that repeat
- Build strategies based on how big traders behave
Markets You Can Analyze
This tool covers many major markets:
- FX: EUR/USD, GBP/USD, USD/JPY, AUD/USD, NZD/USD, USD/CAD, USD/CHF, USD/ZAR, USD/MXN
- Metals: Gold, Silver, Copper, Platinum, Palladium
- Indices: Dow Jones, S&P 500, NASDAQ, Nikkei 225, E-mini contracts
- Crypto: Bitcoin, Mini Bitcoin, Ethereum
- Energy: WTI Crude Oil, Natural Gas
- Others: US Dollar Index, VIX, Wheat, Corn, Soybeans, Sugar, Treasury Yields
Use this tool to learn how the pros trade. Watch their moves, spot patterns, and build strategies based on real data—not just guesses or news headlines. The TACO trade is just one example of how markets react to news—and how smart traders react to the crowd. By following how professional traders build and adjust their positions, you can spot signs of strength or weakness before the headlines catch up.
Explore the Titan FX Research Hub to start spotting these patterns for yourself. It’s not about guessing the future—it’s about reading the present. In trading, the real edge comes from understanding behavior. Let the pros show you the way.
