A Strategy to Trade on Nonfarm Payrolls
US Nonfarm Payrolls (NFP) is an economic indicator released once a month, usually on the first Friday of the month. NFP shows the change in number of employed people in the United States during the previous month. The release usually causes strong movements in all currency pairs containing US dollar.
Right ahead of the NFP the market usually either becomes flat or starts swinging in different directions. Ahead of the release set two pending orders in opposite directions (buy and sell). The orders should be set at least 20 pips away from the current price, so that you could avoid false market entry. If the price goes up and opens the buy order, you will be in long position. If the price goes down and opens sell order, you will be in short position.
Set stop loss orders around the current price, that is at least 20 pips away from the entry points. Take profit orders should be 60 pips away from the entry points. In this case the risk/reward ratio will be 1:3.
In the example below there are the following positions ahead of NFP:
1. BUY STOP 1.2625, Take Profit 1.2685, Stop Loss 1.2605
2. SELL STOP 1.2585, Take Profit 1.2525, Stop Loss 1.2605
If one order is activated, you should close another one.
If the price is confidently moving in one of directions, you may move you stop loss order to breakeven. However, do this at least after 15 minutes from the release. Remember that the volatility of the currency pair depends on many factors and changes in time, so to choose the amount of pips to set your entry and exit orders correctly you should study the pair’s dynamics in the recent days and weeks.