In the development of your forex strategy do you wonder how you can trade the non-farm payroll report?
Seeing this is one of the most, if not the most, volatile announcement during the month (first Friday in every month) newer traders watch the huge movements and wonder how to make money from all that volatility.
Here’s an answer you may not fully appreciate until some explanation is offered. “How do I trade the non-farm payroll report?” The answer is: “By maintaining a neutral position!”
To put it another way, YOU DON’T!
The market is far too volatile at this time to expect a high probability trade. There may be some gamblers out there who relish the thought of ‘placing a bet’ to go long or short. But serious traders know better.
Actually, the professional traders I know all say the same thing: “Stand aside and wait for the market to calm down.”
This may take between 30 to 45 minutes in some cases and even then the direction of the market may be uncertain.
Some suggest you can trade volatile market movers such as the non-farm payroll report by waiting for the first leg of the move, up or down, then wait for price to pull back 10 or 15 pips, then enter a trade to catch the second leg of the move which often follows.
That’s one possibility but still very high risk. Personally I prefer to base my forex strategy on sound market assessment and carefully researched trades.
However, while many professional traders sit out the non-farm payroll report, that doesn’t mean they don’t trade afterwards. After the market has made a violent move in one direction you sometimes see price stalling and then give a clear signal that it’s momentum is exhausted.
This may be in the form of a candle pattern such as a hammer with a very large shadow which also happens to be on a key support or resistance level.
Now you can enter a trade with a small level of risk as you place your stop just above the high or low of the candle signal.
This advice applies to all fundamental announcements which are considered ‘market movers’. By developing a cautious forex strategy based on sound trading principles, you will enjoy this business and get the satisfaction of seeing your account equity steadily growing.
Michael A. Jones is a writer and webmaster with over 10 years experience who also trades the forex regularly. Visit this page for details of how he finally started to make consistent profits:
http://www.vitalstop.com/Forex/forex-course.html
Click here for his advice for absolute beginners:
http://www.vitalstop.com/Forex/learn-to-trade-the-forex.html
Michael has also put together a list of key free resources which he finds invaluable:
http://www.vitalstop.com/Forex/forex-directory-free-resources.html
Written By: Michael A. Jones
