Strategy for Trading Non-Farm Payroll Report

This week is Non-Farm Payroll Report Week. The Non-Farm Payroll Report is a major USD Economic News event that takes place every first Friday of the month. This is where alot of profits can be made, or you can lose your shirt.

There are many great ways to trade NFP. As a technical trader I either open up a hedge and let the profits run and close the losing trade at the first sign of trouble. You have to be careful however, the NFP has been known to do a fake out and reverse shortly after setting a new course.

If you aren’t able to hedge, you can quasi-hedge by opening a trade on correlating currency pairs. For example, the EUR/USD and GBPU/USD will typically move in the same direction while the USD/CHF will move in the opposite direction. All the major yen pairs, GBP/JPY, EUR/GPY, USD/GPY will move in the same direction typically. If they don’t, you’ll want to be cautious. When in doubt stay out and get out!

So as an example, you could open a Buy Position for the Eur/Usd and a Buy Position for the Usd/Chf. Basically you’re hedging the USD.

Another great strategy is to use Fibonacci Retracements on the 5 minute chart. Simple look for activity that’s a direct result of news, draw your fibonacci levels from the lowest low to highest high for an updtrend (or highest high to lowest low for a downtrend) and typically the 38.2% level is the first retracement. The second wave typically it’s 50%. So in other words, you still go with the direction of the trend, say it’s up. You wait for it to retrace down to the fibonacci level. Look for a sign that the trend is going back in the trend direction, and enter the trade. Works great for grabbing 10 pips at a time.

You can also experiment with opening multiple positions. Ie. 2 buys at 100,000 and once you hit your first profit target, you close one position and let the other one run or stop it at a 1 pip profit. Price action is the best indicator. If things are moving rapidly, let er run. If things slow down, consider closing.

Note that some brokers won’t let you open multiple lots when you hedge. But you can quasi-hedge and open multiple lots on opposing currencies, like described above. For example, 2 buys at 100,000 for Usd/Jpy and 2 sells at 100,000 for Eur/Jpy.