Non-farm payroll trading on 4/4/08

Non-farm payroll trading (News Trading)

As I wrote before, I like trading currencies when they are volatile. As usual, I took advantage of the release of non-farm payroll on 4/4/08 to seize the opportunity to make money in a relatively short period of time.

What is non-farm payroll?

A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees:

- general government employees
- private household employees
- employees of nonprofit organizations that provide assistance to individuals
- farm employees

This monthly report also includes estimates on the average work week and the average weekly earnings of all non-farm employees.

(For details about non-farm payroll, please visit Investopedia.)

How I traded on the release of March NFP

My basic strategy for this trading session was going short on USD/JPY. When I trade on the release of news that moves the market significantly like NFP, the first thing that I do is to spot the trend's direction of the currency pair that I am going to trade AFTER the new was released. I never hold a position BEFORE it is released in order to avoid getting trapped in a fake movement of the price as it happened on 4/4/08. As a matter of fact, USD/JPY shot up about 40-50 pips right before the non-farm payroll was released as if the actual number would be better than the market was anticipating - it turned out that it was NOT in the end! I assume that a lot of traders got trapped in this big fake movement and whipsawed. As soon as I confirm the direction of the trend, I go long/short depending on the direction; no brainer. What is important is to check the important resistanse/support points BEFORE trading on the news. I keep holding the position until it reaches to the points, but tend to close it without any hesitation as soon as it shows some hesitation or a strong counter movement. I have one more tip to minimize the potential big loss from the sudden counter movement - when you see the price movement starts hesitating or stalling, immediately set a stop loss of 10-15 pips.

I also tried to wait the price to bounce back until it showed a sign of exhaustion so that I could make safer short entries again - this is probably a safer way to make money in news trading based on what I have observed as I made +58 pips for one short trade Friday. Overall, it worked as I planned.

The result of my non-farm payroll trading on 4/4/08

As you can see in the image above, I gained 129 pips and lost 19 pips within five hours after the non-farm payroll was released.

The total pips gained were 110 pips on that day. That news trading was going pretty well except that I was stopped out twice. I was not going to trade for five hours, but ended up doing so because it was a Friday night here:)