Non-Farm Payroll: The Non-farm payrolls report is one of the most anticipated economic news reports in the forex markets. It is published the first Friday of the month at 8:30AM Eastern time by the U.S. Bureau of Labor Statistics. The data release actually includes a number of statistics, and not just the NFP (which is the change in the number of employees in the country, excluding farm, government, private, and non-profit employees). Another metric included in the data release is the unemployment rate.
As one of the most anticipated economic news events of the months, Integrated Binary Options Services focus mainly on currency pairs (especially those involving the U.S. Dollar) and typically see big price movements in the minutes and hours after the data is released. This makes it a great opportunity for traders with a sound strategy to take advantage of the volatility.
Step-by-Step NFP Trading Strategy: Most times, we trade the EUR/USD after the NFP report. The EUR/USD is the most heavily traded currency pair in the world, providing the smallest spread and ample price movement for making trades. There is little reason to day trade another pair during the NFP report.
We close all prior day trading positions at least ten minutes prior to 8:30AM ET when the data is scheduled to be released. For this strategy, we do not take positions before the announcement; rather, we do nothing until the NFP number has been released. When that occurs, the price will see a significant rise or decline, typically lasting for a few minutes (sometimes more). During this initial move, we do nothing and just wait. For this strategy, we use a 1-minute EUR/USD chart.
The initial move establishes the first trade direction. Just after 8:30AM ET, the price will rise or fall rapidly, typically by at least 30 pips or more within a couple of minutes. The bigger this initial move, the better for day trading purposes. The initial move gives us the trade direction (long or short) for our first trade. If the price moves more than 30 pips higher, we will want to go long, but only if and when we get a valid trade setup, which is discussed shortly.
If the price drops more than 30 pips in the few minutes after the 8:30AM ET release, we will look to go short for our first trade, when and if a trade setup occurs.
What We Are Waiting For: After the initial move of 30 pips or more, there must be a pullback of at least 5 one-minute price bars. This means that if the initial move was up, we want to see the price drop from the high of the initial move and stay below that for at least 5 bars (they don't all need to be down bars). Preferably, the pullback should show significant downward progress, but it must not drop below the 8:30AM price where the initial move began. If the initial move was down, we want to see the price rally off the low of the initial move and stay above that low for at least 5 bars. Preferably, the pullback should show significant upward progress, but it must not rise above the 8:30AM price when the initial downward move began.
By waiting for at least a 5-price-bar pullback, we can draw a trendline across the highs of the price bars (if the initial move was up) or across the lows of the price bars (if the initial move was down). Note: We are drawing the trendline on the price bars that make up the pullback.
If the initial move was up, buy when the bid price breaks above the trendline. If the initial move was down, enter a short trade when the bid price moves below the trendline. This is the simplest form of the strategy and is useful in most situations. However, occasionally, the pullback may not provide a trendline that is useful for signaling an entry. In such cases, the alternative entry method discussed next may be helpful.
If a long trade is taken, place a stop loss one pip below the recent low formed prior to entry.
If a short trade is taken, place a stop loss one pip (plus the size of your spread) above the recent high formed prior to entry.
After the initial move, if the price pulls back more than half of the distance of the initial move (before breaking the pullback trendline and signaling an entry), we use an alternative method. Once the price has pulled back more than 50% (using a Fibonacci retracement tool), wait for the price to consolidate for at least two price bars. This means the price moves sideways for at least two minutes. Draw a line along the high and low prices of those two price bars once the second bar completes and the third bar starts to form.
If the initial move was up, buy if the bid price moves above the high of the consolidation. If the initial move was down, enter a short trade if the bid price drops below the low of the consolidation.
If a long trade triggers, place a stop loss one pip below the low of the consolidation.
If a short trade triggers, place a stop loss one pip (plus the size of your spread) above the high of the consolidation.