How to beat the NFP: My thoughts

How-to-trade-NFP-1

Ok. Let’s kind of sumnarize the major USD events so far. FOMC minutes did not reveal anything spectacular. There are plans for 3 more hikes over the rest of the year, so thats one hike in 2 months. Let’s look at some key factors that the FOMC take into consideration.

inflation

Are we seeing a start of a down trend away from the desired 2%?

nfp

Rather mixed, but the NFP has always been the centre of speculative trading

unemployment

Unemployment is clearly going down. And that is quite a good indicator of an improving economy

The next forecast for the NFP, depending on which news source you use, is projected to be above 170.

Usually, at the moment of NFP release, both the numbers and the unemployment numbers are taken in context. And it is usually within those few minutes of frantic speculation that the price of the US will go crazy, or not. (Who knows what the market does?)

So it looks pretty good for tomorrows NFP. And currently the USD seems to be moving upwards in anticipation. So, anyone want to put a buy order on the USD today?

Remember last week’s NFP for the EUR?

nfpeur.JPG

looks like a middle finger doesn’t it..dont know at who tho. Retails? Institutions? Everyone?

To sort of illustrate my point, go through the past daily charts of the main USD pairs. And without looking at the dates. See if you how many you can identify as those are the NFP dates. Some are obvious. But most of the time, I find that I cant. In other words, over the long term, this single event may have little impact on the overal market, but compiled NFP numbers, and further affirmation by the Fed, may be the true market movers.

To me, the NFP release is a very bad time to place your bets. The spreads go wild, your stops get wiped out, your emotions are hanging by the thread as you try to double your account in 5 mins, looking at the min charts.

What is your edge against the pros who are all well prepared for the NFP, who may even have pre-access to the numbers? (Watch Trading Places) How about the hackers who have already hacked into the NFP numbers and sold them to financial institutions?

Then there is you. Trying to make a quick bet in a crazy, deadly environment that will make you make huge mistakes.

Now, there are ways to trade the NFP. I know that. There are ways to trade through the EIC. There are ways to trade through the elections. Through interest rate announcements. Through media conferences.

To me, these are not sound trading strategies. They tend to build up alot of anticipation, greed, and fear, and you have to bet really big to profit well from the sudden movements: which can also move against you very quickly.

I don’t trade through the NFP, but I do take note of it. I see if there is anticipatory action prior to the NFP, and I like to see divergence before I enter a small position to fade the crowd, without a stop loss. And I my timeframe can go from 1 hour to 4 hours, and may hold the position until the next week.

I don’t aim to double my money in 2 minutes. That’s gambling. And my job is certainly not gambling.

I’m trading smart, trading casual.

Be careful of the wolves out there. Watch your back, and always, seek your edge against the market, even if it means going for supper instead of looking at a boring screen of numbers.

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