The big day is here, and the Non-Farm Payrolls report that much of the world has been waiting for will finally be unveiled tomorrow morning at 8: News announcements of this nature can take on a life of their own with the amount of interest they receive. Nobody in the world has any idea the way that NFP will print… and even if they did, there is no way of knowing exactly the way that the market will price that data.
What follows are three ways that traders can look to trade around high-importance news announcements like NFP. Many professionals choose to avoid trading during high-impact news announcements just because of how dangerous or erratic they can be.
There is absolutely no shame in having fear of a market; this is what helps keep traders alive. Bravado or machismo is absolutely worthless if you drain all of your equity.
You can get a demo account completely free-of-charge. This strategy looks to capitalize on the mayhem that may ensue during an especially strong print. In this strategy, the trader wants to look to go into NFP with their full position s , so that if the volatility created around the announcement may be able to push their trade deeply into profitable territory, they can look to take advantage of that.
Support and resistance identification is a necessity before opening any positions. Traders can also take this a step further by looking to the hourly or four-hour charts to determine any trends that may exist leading into the announcement.
This way, if the biases going into NFP take place after the data is released, the trader can be on the right side of the move. Stops for long positions can go below support, and stops for short positions can go above resistance so that if either of these levels are broken, the loss can minimized.
A key note here: Traders are advised to investigate stop distance on their positions ahead of a data announcement as heavy as NFP. When spreads widen, stops can be triggered before prices begin trending and this can be disastrous for the trader. But, if prices then trend up pips on the EURUSD you have no position remaining even though you were right in the long position.
Traders generally want to investigate a minimum stop distance of 40 pips or more, and even then quick volatility may make the position vulnerable. Trading reversals is inherently dangerous in a normal environment; but when adding in the additional risk around news announcements, it can make this type of strategy very dangerous. Like the Slingshot strategy, traders want to go into the release with support and resistance levels identified. Then they wait for the news.
In the immediate period following the news announcement, the trader can watch prices to see if those longer-term support or resistance levels come into play. And if they do, the trader watches to try to get an idea as to whether or not those levels are going to hold.
Price action can be of huge help here. Traders want to see support coming in to the market at these longer-term levels before triggering a long position with a stop below support.
But if that support level does hold, the trader can begin scaling out once the position starts moving in their favor in an effort to capture as much upside as possible.
Non-Farm Payrolls can be a game changer. A big beat or miss can stop a trend dead in its tracks and create massive reversals.
In many cases, enormous volatility is created around the announcement with perhaps some slight follow-through thereafter; only to see trends resuming their previous trajectory. This can potentially be a huge opportunity for longer-term traders to pick up or add positions at a much more favorable price than they would have otherwise been able to.
Joe can go into NFP looking to do some bargain-hunting. The next step in the process is to wait for the news to come out to see if prices can move up into this resistance zone so that Joe can enact an order. Once price moves into resistance, Joe can begin looking to sell with a stop above the resistance zone. Traders can look at a shorter-term chart to look for price action indications of bullish or bearish reversal patterns to increase the potential effectiveness of the strategy.
Would you like to enhance your FX Education? DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Click here to dismiss. Price action and Macro. Trading news is dangerous as wild and erratic price movements can extend against the trader Traders need to be vigilant with risk management, looking to capitalize when on the right side of the move We share three different types of strategies for trading during news The big day is here, and the Non-Farm Payrolls report that much of the world has been waiting for will finally be unveiled tomorrow morning at 8: Foundations of Technical Analysis: Classic Chart Patterns, Part I.
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