Saturday 31 October 2015

Forex Outside Day Trading Technique



Outside days can occur frequently on daily charts. The secret of the outside day is the bigger the better and it has more meaning if found at the end of a trend.
They can be short lived and I always take my profit quickly. The outside day (OD) should completely encompass the previous day. It must have a higher high than the previous day and a lower low than the previous day.

One of the most important things about this pattern is that the bar closes in the opposite direction of the trend. If the trend is down the close on the OD must be near the high or in the upper part of the bar. The opposite is true of the up trend. The OD may still work if this is not the case but my research show that it is more effective if it does close in the opposite direction.

A great example of this happened on the cash Dow as I was trading it (24th July 02, refer to chart). I like to trade this in two ways. First, depending on what the market has been doing prior to the outside day I will place a entry order a few ticks above the high of the OD if the trend has been down and I am looking to get long. Once I am in the market I will place my stop loss either as a dollar amount or at the .618 fibonacci retracement of the OD.

If you don't know anything about fibonacci don't worry, we will cover that in future lessons. The same applies to the short trade. If the OD occurred at the end of an up trend and I am trying to get short, I will place my entry order a few ticks below the low of the OD. Once taken short I will place my stop loss order in the same way as the long trade, either as a dollar amount or as the .618 fibonacci retracement.
The second way I like to trade this pattern is to trade it intraday. I closely monitor what happens at the high of the OD if I intend to go long and the low of the OD if I intend to go short.

Once the high or low has been taken as the case may be I will then enter the market on a 5 minute or 1 minute chart. For long position I will buy the first retracement with a tight stop loss order under an intraday support and if trying to get short I will sell the first rally with a stop loss order above an intraday resistance.
Below are two examples of Outside Days. The first occurred at the end of a down trend and the second occurred at the end of an up trend.


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Forex Inside Day Trading Technique

Inside days can be very profitable if traded correctly. First of all it is ecessary to identify an inside day.
At the close of the market you are following take a note of the high and low for that day (day two). For it to qualify for an inside day the high must be lower than the high of the previous day (day one) and the low of the day must be higher than that of the previous day.

In other words the bar (day 2) must be inside that of the previous day (day one). This is the set up. I like to trade this in two ways.

The first method is to place a buy order a few ticks above the high of day 2 and a sell order below the low of day 2. Once your orders have been placed it doesn't matter which direction the market goes you will have a position.

You can place your stop loss order in one of two ways. You can use a dollar amount or if the inside day (day 2) is not too large you can place a stop loss a few ticks above the high of the inside day for short position.
If you are taken long then your stop loss would be the low of the inside day.
I like this trade to work on day 3 only. If it has not worked on day 3 I cancel the trade. It may still work after day 3 but in my research it tends to make the most gains if it works in day 3.

The second method is to first identify an inside day on a daily chart and then trade it intraday. If you are trading intraday you can monitor price action at the low or the high of day 2 and either enter the market as the high or low of day 2 is taken or enter on the first rally or dip as the case may be on a smaller time frame.
 


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How to Detect Forex Market Trend Using Pivot Point

Those of you who have been trading for a while will be familiar with Pivot Points. During this lesson I want to go over how to find a Pivot Point and also a slightly different method of using them. First let's look at how you calculate a Pivot Point.

Using a bar chart you will observe that each bar has an Open, High, Low and Close. This information represents all price activity during that particular period.

In the case of the following example, we shall use a daily bar. To calculate the pivot point all you need to do is add the High, Low and Close. Once this has been done you next divide the total by three, e.g. the cash FTSE on the 2nd May 02 had a High of 5192.70, a low of 5125.50, and a close of 5174.10. If you add the three together, you get 15492.3. You then divide that total by three to get a Pivot Point of 5164.10.
......
OK, so far so good, but what do you do with this information? Well, one technique I like to use intra day is to use the pivot point as a trend indicator. We already know that the Pivot Point for the 2nd May was 5164.10 and we will use this the next day as an intra day trend indicator.
If the price is above 5164.10, then I would only be long and if it were below 5164.10, I would only be short.


As price can fluctuate around any given point I also add a further proviso. If I have support close to 5164.10, I will first wait for the price to pass through 5164.10 and support before entering short. If I have resistance close to 5164.10, I will first wait for the price to move through the Pivot Point and
resistance before entering long.

This method becomes even more powerful when the Pivot Point is close to the opening price. If, for example, the opening price is 5174.10, the Pivot Point is 5164.10, and I eventually go short at 5155, I can stay short the whole day as long as it does not go above the Pivot Point.

Once in a position I normally have a very tight stop to begin with and then will follow the market with a trailing stop to lock in profits.

Another way I like to add Pivot Points to my analysis is for more long-term projections. I will use the Pivot Point of a Yearly, Monthly and Weekly chart. In this case it would be the High, Low and Close of the previous Year, Month and Week.

I like to think of the weekly Pivot Point as the short-term trend, the monthly as the medium term trend and the Yearly as the long-term trend. I find this particularly useful in Spot Forex. If I am below the yearly, monthly and weekly Pivot Point, I know I am in a strong down trend and I can scale into multiple positions over time. The same holds true for long positions.

The point is there are many ways to determine trend. You can also use Pivot Point to find potential Support and Resistance, which we will cover in later lessons.

Experiment with Pivot Points and see if it suits your trading style. At the very least it is always handy to know where they are and it may help you decide which side of the market you should be...Read more



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How Does A GDP Announcement Affect Forex Market?

The Australian GDP announcement for the second quarter of 2012 showed that the Australian economy grew much more than expected. The economy grew 1.3%, compared to official estimates of a 0.5% growth. After a month of pessimistic economic news for Australia and in the wake of further interest rate cuts, such a result came as welcome news for the nation and sparked activity in forex trading.

The Australian Dollar (AUD) rallied in many of its denominated currency pairs, showing particularly strong gains against the US Dollar (USD).
The AUD has staged a recovery in forex trading ever since the unexpected half-point interest rate cut made by the RBA on May 1. The encouraging GDP figures account for the last spike seen in the graph above, showing a strengthening AUD despite the RBA cutting the rate by a further quarter-point at the start of June.
Fittingly for forex trading and currency pairs, there are always two sides to every coin. Just as the AUD strengthened on the back of the GDP announcement, the USD has almost simultaneously weakened after economic data released by the US Bureau of Labour. US non-farm payroll figures, a key economic indicator for the country released on June 1, showed growth in the employment sector that was far below national estimates. What this has served to do is strengthen the calls for another round of quantitative easing, which in the short term would devalue the USD due to its inflationary effect. Such a move could spark further movement in forex trading against the USD, and possibly towards the Aussie.
It is important to see how a GDP announcement and other economic news can influence a currency pair. You can keep track of all the latest forex trading developments with IG Markets. They provide a dedicated forex focus, which keeps track of all the recent movement in the major currency pairs, as well as an extensive collection of analysis and...Read more

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Friday 30 October 2015

How to Identify High Probability Set-ups in Forex

Identifying the trend is simply but one piece to the puzzle, once the trend is correctly identified, you then need to determine whether or not prices will continue to exhibit the trend. There are many times when the trend is easily identified, but is actually on the verge of changing trend direction. For purposes of this article, let’s assume that the time frame that we do the primary analysis (i.e. the time frame we will execute on) is the 60-min chart.

The charts below are the 60 & 240-min of EUR/USD. On each chart, the trend is quite clear. If we then defer to bullet point # 1 above -- Higher time frames, generally, but not always, take precedent over lower time frames -- we would have to resist the temptation to short EUR/USD based on the 60-min chart.
However, this simple analysis, will often lead you to miss trades. In order to make a proper assessment, you need to add one more indicator to your chart in order to conclusively know to not short EUR/USD based on the 60-min chart -- stochastics.
In this case, the stochastics simply confirm the conclusion we drew from looking at the first 2 charts we posted without the stochastics. However, there are many times when this will not be the case.
In the next installment, I will provide several examples of how to properly use stochastics and inflection points in order to...Read more

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The Wave Nature of Forex Support and Resistance


Many traders like to pick tops and bottoms. Sometimes they’ll be right, but nobody is right all the time. Through extended observation, say a person who picks a top or bottom is going to be correct about five or six out of every 10 tries. That might seem like a mediocre statistic, but it takes a lot of skill to bat even 50% forecasting significant turns — something that happens far less than half the time in the markets.
As most traders know, the first move off a high or low doesn’t go far. It’s always a smaller move and generally retests the high/low or goes sideways for an extended period as it sets up for the larger move. Say the trader who attempts to pick the top or bottom rides the first leg and gets caught in the frustrating sequence of the retest. Unless the trader is really good at scalping or swinging on an hourly/daily time frame, he or she will give back a portion of those gains. But if there’s a re-entry on the reversal, and the target is first support/resistance, enough money must be made to make up for the four-to-five times out of 10 that the trader was wrong. If your winners amount to that small first leg of a new move, then you likely aren’t making the money you need on the winners to be profitable over time.

The polarity flip

Traders have preached through the ages that once you get a winner, you have to let it run. Professional athletes like to talk about how the coach puts the team in a position to win. By understanding the type of moves that can run, the trader finally puts himself in a position to win.
One of the easiest ways to make that happen is to be aware of the polarity flip. Simply put, an area of resistance will turn into support and an old area of support will turn into resistance. Once this phenomenon materializes in a pattern, it leads generally to outstanding moves that put the trader in a position to stack big profits as he lets the winner run.
Let’s review a simple example on a large time frame. “Bull to bear” (below) shows the top of the 2007 bull market in the Dow and the beginning of the bear market. The price action comes down to a near-term support area, which is close to old support on the way up. It bounces then drops to a new low. A multi-week rally materialized, but all it could do was come back to the ridge of old support. Why does this happen?
Bull to bear
It could be that late bulls who bought in near the old top didn’t realize they were buying the top and quickly found themselves underwater. By the time that happened, they realized their mistake and attempted to exit as close to breakeven as possible. Smart bears, who realized the trend might be turning, were eager to short the market. The combination of late bulls and timely bears led to the big move south.
Instead of trying to pick the top and suffering through the early stages of a new move, if the trader realizes the flip in polarity generally leads to what proponents of Elliott Wave analysis call the third wave, he puts himself in a position to win more with less risk. While this is an extreme example that preceded the financial crisis, what generally happens in these circumstances is the best move does materialize at this point.

Wave tendencies

“Slow turn” (below) depicts the top of the oil market in 2011. The first leg down doesn’t give a retest of the peak but instead turns sideways for 24 days before dropping to retest the area of support. The retest goes no higher than former support but turns into a 25% drop. This setup introduces the next condition, which is the A-wave tendency line.
Slow turn
Elliotticians label moves with numbers or letters. A five-wave impulse is just that — the fifth move of the larger trend. The corrections in those legs are labeled with letters: A, B and C. For simplicity, the first move off a high or low is either a one-wave or an A-wave and is called the “A-wave tendency line.” It doesn’t matter if it’s an impulse or correction because the behaviors are the same and can be traded in any time frame.
“Setting up” (below) is a recent intraday move in gold. In this case, the move off the low slowly drifts higher until it levels off. It doesn’t have to retrace the bottom necessarily, but you can see a smaller pullback inside the move higher that tests the initial breakout; this is likely an A-wave tendency line on a five-minute chart.
Setting up
In the bigger picture, the price gaps up beyond the A-wave. It finally pulls back in a bigger way. Traders should look for an edge where any potential pullback might resolve itself. In this case, and in many cases, that area will be the polarity flip and the A-wave tendency line.

Confirmation

Once the polarity flip and the A-wave tendency line materialize, a confirming candle formation typically develops and the market explodes into a new trend. It’s always important to use another signal to time the trade. This can be the candle or simply keying off an important support or resistance line.
While there still are going to be traders who choose to pick the turn, anticipating the polarity flip is a good strategy for those who may have missed earlier entries and want to position themselves as the move develops. While the whole move is not shown in “Setting up,” this particular setup did lead to a 49-point move in two trading days.
These principles work in any market, especially stocks. “Down drift” (below) is a recent example in Alcoa (AA). The initial move down stops at the ridge of support for the last leg up. Similar to the Dow example, the stock drops slightly lower and recovers to test former support. It tests the A-wave tendency line not once, but twice. When it finally fails, it leads to the most consistent move in the sequence.
Down drift
This methodology works on any time frame. “Day test” (below) is an intraday E-mini S&P 500 chart that includes what could be called an ABC pullback because it has two thrusts in the same direction. In this case, the pattern reverts all the way back to the A-wave before a 17-point move materializes in six hours.
Day test
These techniques for honing your ability to more safely time tops and bottoms are not the only types of support and resistance lines. There are double tops and bottoms (some of the most reliable patterns), Andrews and trend channel lines, as well as areas of Fibonacci retracements and extensions.
One of the finer points to realize is that traders don’t have to concern themselves with the news. Generally, what later will be defined as an important news event will materialize near these important magnet points on the chart. Nor are the technicals always precise; other times, the pattern will not give a perfect touch of the polarity line. It only will come close.
To be successful, you have to become comfortable in an uncertain environment. Not everything is wrapped up in a neat package. Sometimes, the pattern will undershoot or overshoot the line. The best that traders can hope for is to manage the probabilities.
It’s also important to combine this method with an additional signal. A confirming candle is probably the best tool. If the candle reversal signal does not look good on a larger time frame, it might be necessary to adjust your expectations. In other words, if you were hoping for a reversal on an hourly or daily chart, but find a confirming candle only on a 15-minute basis, the market may be hinting that the move isn’t going to be as big as anticipated.
In the end, these methods may work because trading is a zero sum game. For every winner, there is someone on the losing side of the trade. That being said, the people who end up winning may give up their shares/contracts because they are satisfied to take the first part of the...Read more

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How To Trade Range Breakout in Forex

This trading system is designed to function per excellence on daily chart for private investors and traders who do not have time intraday but want to achieve high yields with active trading.

 The analysis and the placing of buy or sell orders can be done easily after the close of the stock exchange and therefore intraday live-monitoring is not necessary. Breakouts from below-average price ranges are especially good for entries. In the following article you will learn what is important and how to develop a trading strategy based on this knowledge.

The idea is very old but still relevant. The stock market often shows changes in volatility – calmer days and smaller trading ranges often follow days of bigger moves. The same goes vice versa: a dynamic move up or down often follows calmer days. Wellknown trader Toby Crabel introduced different trading strategies based on the so-called “Narrow-Range”.

(NR) days combined with the change in expansion and contraction of volatility in the early nineties. We want to continue this idea and use it to develop a trading strategy step by step.

Chart Setup and Entry Rules

We will start with the setup and the necessary indicators that will be explained shortly. The following setup is required to generate signals:

  • Daily chart of a stock market index 
  • Moving Average of 250 days (MA250)
  • Average True Range (ATR) of ten days (ATR10)
The pattern is known as “NR3”. It describes a daily candle with the lowest price range of the last three periods – the difference between high and low is measured. If such a candle appears, the breakout is traded the following day with a stopbuy order. Now the MA comes into play, which acts as a simple trend filter: If the market is above the MA250, we trade long signals only. The high of the NR3 candle is the stop-buy trigger. But if the index is below the MA250, we only enter short signals. The trigger is the low of the NR3 candle. 

Exit Rules

Of course we need more than only entry rules – whether we achieve a profit or loss depends on the exit. There are two elements for the exit in this trading strategy: the simple ATR distance is the initial stop. Successful trades often reach the profit target directly and therefore confirm the trader’s idea. We want such trades to stay in the profit zone after reaching a certain book profit and therefore we add a break-even stop. The rule is: If the index increases by 0.5 per cent or more to the desired direction, the stop is placed at breakeven. Finally we add a profit target of twice the ATR.

This article written by David Pieper was originally published in the july 2014 issue of Traders' Magazine.
  • David Pieper is a CIIA and has been interested in stock markets since the end of the Nineties. He concentrates on trading with CFDs and is a freelance author.
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How to Trade Breakouts Successfully in Forex

It is always the same question for traders of all experience-levels in Forex: Which strategy achieves the most profit and which trading system will save the account in the forex market? We cannot promise the Holy Grail, because it simply does not exist in trading. But there is a helpful strategy that achieves high profits in volatile market phases: the breakout strategy.

Simple Approach – Huge Effect 
Breakouts are best used with the majors, the five major currency pairs. We use the volatile trading times of the European and American trading session (8 am until 10 pm Central European Time) to cover the fundamental events. The price range that the price shall “break” is formed from 12 am to 8 am CET and offers the trader the basic trading approach for the following day at 8 am. This  range is valid for the particular day – you’ll define it again on the next day and therefore this strategy is useful for day traders. The highs until 8 am are the upper border and the resistance level and the lows are the support levels. If the price exceeds the high or undercuts the low, the buy order above the high or the sell order below the low is executed. The trader does not need to watch the chart the whole time – we enter pending orders at 8 am for the buy and sell entries. As soon as a buy or sell order is executed the trade is managed all day – we use a 1:2 risk-reward ratio on quiet days and a risk-reward ratio of 1:4 on economically important days, for example a Fed decision regarding interest rates. We do not risk more than one or two per cent of trading capital per trade – in contrast to four or eight per cent of profit possibility. Trade management is simple with an automatic trailing stop of 15 to 25 pips.   


Entries 
We observe the price range between 12 am to 8 am CET in the 15-minute chart. During this time we determine the highs and lows. We enter two to five pips above the high or two to five pips below the low. Furthermore, we look at support and resistance levels in the hourly chart. We determine sell orders above resistance and sell orders below support. 

Exits
 Greed is one of the cardinal sins in trading. But every trader knows the feeling of a trade in profit and you want to achieve even  more pips. This is a very human feeling and therefore you need a strong trading plan with fixed take-profit rules. We calculate it based on the RRR and we follow it strictly. For example, we can determine the stop-loss (SL) at 20 to 30 pips. The take profit (TP) is determined at 40 to 100 pips, depending on market fluctuation. We choose a smaller TP in quiet market phases and a higher TP on days of interest rate decisions and other big events. If a trade is stopped out with a loss, we can re-enter on the same day, again with a pending order. The...Read more  



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The Metrics of Forex Market Price Oscillations

You might look at the stock prices at the bottom of your television screen or, if you are trading currencies in the forex market, you might look at the exchange rates go up and down your computer screen. Prices move and you wonder whether their behaviour means something. Could the market be sending out signals that you can use to make your decisions? How, exactly, are you going to study the market?
For anybody to make money from the market, they must have a way of studying it. There are predominantly two approaches: fundamental and technical. Fundamental analysis focuses on value but this is the subject of another article. Technical analysis, on the other hand, focuses on price and its movement.
The movement of price has the following properties which traders can study to aid in their decisions:
1. Trend — its persistence to move in one direction,
2. Volatility — the magnitude of its fluctuations on a periodic basis,
3. Momentum — the rate of its acceleration and deceleration,
4. Cycle — its tendency to move in cyclical patterns, most especially in the futures market,
5. Market Strength — the number of transactions supporting its movements,
6. Support and Resistance — its tendency to rise or fall to a certain level and then reverse, repeatedly.
Analysts, using the technical approach of analysing the markets, have developed their own set of indicators, different to those used by fundamental analysts. These indicators are used to measure the properties of price movement. Fortunately for modern-day traders like you, you do not have to devise your own tools. You just need to...Read more



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Thursday 29 October 2015

How To Trade Forex 1-2-3 Method

Forex 1-2-3 Method

This particular technique has been around for a long time and I first saw it used in the futures market. Since then I have seen traders using it on just about every market and when applied well, can give amazingly accurate entry levels.

Image

Lets first start with the basic concept. During the course of any trend, either up or down, the market will form little peaks and valleys. see the chart below:
Image

The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:

Image


Image

Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:

Image

Now here is where it gets interesting. The rules for the trade are as follows:

Uptrend

  1. This works best as a reversal pattern so identify a previous downtrend
  2. Wait for the MACD to signal a buy and for the 1-2-3 set up to be in place.
  3. As the market pulls back to point 3, the MACD should remain in buy mode or just slightly dip into sell.
  4. Place a buy entry order 1 pip above point 2
  5. Place a stop loss order 1 pip below point 3
  6. Measure the distance between point 2 and 3 and project that forward for your exit.
  7. Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.

Some examples:

Image

Image

There are...Read more



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How To Trade The Non-Farm Payrolls

Once per month, financial markets regularly take on the big spotlight. Every first Friday of the month, at 12.30 pm GMT, the US Bureau of Labor Statistics publishes the employment data, which gives a good glance on the state of the american economy. The US Non-Farm Payrolls release is the biggest fundamental piece of data the market gets regularly.


US jobs

Besides our monthly report on the event, in this series of articles several of our dedicate contributors help us explaining its importance and impact on the FX trading. We also get from them valuable insights and tips to trade before and after the event.

Why is the NFP so relevant?

Wayne McDonell, Chief Currency Coach at FxBootcamp, gives a precise answer to the question in the first paragraphs of his article “How To Prepare For and Trade the Employment Situation Report”:
“This report is important because the US is the largest economy in the world and its currency (USD) is the global reserve currency. The many economies peg (tie) their currency's value to the reserve currency, many commodities such as gold and oil are priced in terms of the reserve currency and the local economy's debt is priced in terms of its own currency.

The Non-Farm Payroll report, because of its importance to the reserve currency, tends to move all markets: currencies, equities, treasuries, interest rates, and commodities. It does so immediately after the release of the economic data and sometimes dramatically.”

A lot more skeptical on the benefits of trading the event, as you can read in its article “Step aside the Non-Farm Payrolls release”Adrián Aquaro, President at Trader College, says its importance has decreased a little bit lately:
“Even if the impact has diminished gradually over time, the US Non-Farm Payroll still generates huge attention on the markets and it normally drives important monthly trends. Lately another event (the Fed Monetary Policy Meetings) has been driving similar attention, thanks mainly to the Interest Rates being at 0%.”

Still, there is no denying to the impact of the data on the markets.

How does the NFP impact the USD?

The answer to this question can begin with a simple analogy. Better employment numbers (more payrolls added), good for the USD; worse numbers, bad for the buck. Kenny Fisher, Analyst at Forex Crunch, expands on that in his “Tips on How to trade the Non-Farm Payrolls”:
“A NFP which is stronger than the estimate (also known as the forecast) indicates that the labor market is stronger than what the markets expected, and the dollar often rises as a result. Why? Let's use a stock market analogy to answer this question. Just like a company's stock often rises after the company releases a strong financial report, so to the US dollar can be thought of as the "stock of the US economy". Thus, when the US releases a strong economic report, the "stock" (US dollar) often rises against other currencies (such as the euro, pound or yen) as a result.

Conversely, a weak NFP report indicates that the labor market is weaker than what the markets anticipated, and a weak reading can push the dollar lower against other currencies.”

But there's much more to this question.
TIP
Kenny Fisher: “Keep current on financial news, especially on the US labor market and employment conditions. This will help you trade the NFP”.

Measuring the impact that macroeconomic data such as the number of payrolls or the rate of unemployed people has on the markets is difficult and complex. Several methods, strategies and tips can be used. Our contributors share some of them in their reports:

Before the NFP release

The hours that precede the release of the employment report may be decisive. Kenny Fisher bewares us of the “high uncertainty”, which “can lead to volatility in the forex markets, as traders and investors anxiously await the release”. But, nonetheless, Fisher thinks that “the volatility often seen prior to a major event does present trading opportunities”.

Trying to profit on that, Wayne McDonell sets up a technical range strategy (read it in his full article) before the release of the NFP data. In his words: “The goal is to overlap the average daily range with solid levels of support or resistance”.

McDonell also does some modeling on related macroeconomical data to elaborate itsfundamental analysis. Those include averages of past headline NFP numbers or Weekly Jobless ClaimsISM Industry Data reports or other employment reports as the ADP or the Challenger. That is key on the preparation of the trades to set up just after the release.

In contrast, Adrián Aquaro doesn't believe in trading before or after the event. He argues that “banks and press already known the information when released and therefore any trader has a disadvantage”. Aquaro also defines the market moves in the minutes that follow the release as “completely unpredictable to individual traders”.

Beware the spreads!

Viktor Eperjesy, Head of Business Development at Trade Proofer, is an expert in gathering information on the brokers' spreads, something every retail trader must take very carefully into account.

In his article, Eperjesy warns us about the divergence between “target spreads listed by brokers” and the actual spreads applied during a high volatility event as the Non-Farm Payroll. In his words:

“As we all know, forex brokers' information sheets listing "target spreads" are not something traders can rely on when they trade around important economic events, like non-farm payrolls. During these minutes spreads first fall apart and recover slowly afterwards as market calms down.”

This evolution is way more explained with this very explicit graphic:

spread evolution NFP EURUSD

After the NFP release

The minutes just after the release tend to show big moves in the prices of the majors, but the volatility usually continues for several hours. Kenny Fisher believes in trading not only the actual release against the expectations, but also against the previous figure. Fisher sticks to the basics: “If NFP is higher than the estimate and/or the previous the dollar will likely move higher, but if lower, it will go down”.

TIP
Wayne McDonell: “Trade the revision number. It is common to see 30% revisions. Especially on months when the headline number is “as expected”, pay close attention the revised number. The market often trades that new information instead”.

In a more advanced analysis, Wayne McDonell proposes another strategy for scalpers, those traders willing take quick trades and profit from short-term swings. This “continuation strategy”, fully explained here, tries to trade “in the direction of the initial reaction to the news by the market”.

Besides, McDonell also argues against “straddling the market” with “options style” strategies. FX Bootscamp's trading coach believes there are several problems with this, such as potentialwhipsawswide spreads and...Read more
 
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