Free Non-Farm Payroll Trading System

Rob Booker and his intern have put together some very good information about trading the non-farm payroll report.   The information includes an eBook, charts showing every move during this economic announcement for the previous 4 years, and spreadsheets showing backtested results.  Rob is also offering a prize of $1000 to the team or person who develops the most profitable long-term strategy using the non-farm payroll report as the central strategy.  

http://www.robbooker.com/NFP/

I wish I had an intern to do the grunt work…. 

Popularity: 2%

What a Setback!

All I can say is that I had quite a setback today.  I'm writing this as my positions just closed out so I'm really disappointed at my stupidity.   Quite simply, I was trying something new and I got bit.

I was short on a 3 position GBP/USD trade that was profitable most of the European session yet not enough to hit breakeven or profit targets.  Then came the US CPI economic announcement this morning.  I have never felt comfortable being in any position going into an important US announcement and this time was no different.  I took my stop losses off the positions with the thought that I would close manually 1 minute after the announcement if my positions were down.  My reasoning? I wanted to prevent from a false spike taking me out of the positions which had happened many times before only to find out I was right.   If anyone was watching the market, you know what happened.  The price did spike but got pegged GBP bullish, the complete opposite of my positions.  I didn't even have time to close out my positions in a timely manner.  I painfully closed all 3 positions at a 75 pip loss each which was 2 1/2 times greater than my normal stop.  

This trade hurts for many reasons:

1. I went from being profitable by 129 pips in December to -96 pips in December
2. Went against my own good judgment
3. I was very patient all week and lost it in a minute
4. Not only does this wipe out my profits for December but also for November and part of October

So you can see how damaging 1 trade can be and it's not even the money that affects me as much as the mental setback.  It's going to take some work to get back to where I was.  

The positives from all of this? I don't foresee ever taking my stop loss off the table again.  Never, ever.  In addition, sometimes I need a big punch in the face to remind me that things like this can happen. 

Popularity: 1%

It’s All About Interest Rates

Thanks to Daily Dopeness for mining this information and ~chaffcombe for providing the content.  Here is what you should be clearly thinking about during each and every economic announcement at this point in time:

"Finally, 99% of market moves following economic announcements are based upon
perceptions on how the information may affect interest rates. If it’s bullish
for rates, the price goes up; if it’s bearish for rates, the price goes
down."

Popularity: 1%

Buy The Rumor, Sell The News Part II

I've been hearing a lot of the phrase, "Buy the rumor, sell the news." This Wall Street Proverb sounds intelligent and is freely thrown around forum posts everywhere but what is the real meaning of it all.

Often a rumor will circulate about some future news release.  Rumors can quickly start from anywhere such as news articles, forums, and just about any other communication media available. Let's take as an example the New Home Sales report released last week.  The consensus was for New Home Sales to come in at 1105K.

Here are a couple of headlines that could have affected your thoughts on the New Home Sales report:

"Horizon Gloomier for US Economy"

"Analysts Expect Home Sales to Drop by 10% This Year"

"New Home Sales Report Could Put Nail in Dollar Coffin" 

Before the report is released, you're being bombarded with speculative information that only deteriorates your view of the consensus which in this case was 1105K.  Traders acting on rumor start to fill their minds with random numbers typically less than the consensus.  

What Trader's May Be Thinking

"I see tons of for sale signs around my house but nothing under contract.  There's no way the number will come in at 1105K"

"1000K" 

"A real estate broker I talked to said houses are taking 5 months to sell now where last year it only took 4 weeks.  New Home Sales won't be 1105K.  I'm thinking it will be 900K"

"850K"

Before the news is actually released, traders are bidding against the USD based on these wild assumptions.  These rumors alone can beat down the USD.  But once the announcement is released, the facts rarely end up being as bad as the rumors.  Since all of the greatest possibilities have already been priced into the currency pair, the news actually causes the currency pair to "re-price itself" to the facts.  Last week, the actual New Home Sales was 1072K and the USD gained against most of the majors.  It gained because the worst possible news had already been priced in.

Popularity: 3%

News Trade Today

I had a couple of issues with FX Engines this morning related to my configuration settings.  2 of my news trades didn't go off because my settings specified to trade a maximum of 1 contract at any one time.  Since I already had 1 trade open, the other 2 did not execute but in hindsight, it was probably better that they didn't.  The EUR/USD 15 minute candle has a long lower wick and the price basically returned to where it opened.

Nevertheless, I profited 20 pips on 1 trade.   Here is the entry log:

The price is 1.2571/1.2574.
Set
fixed exit of 10 pips from 1.2571 to 1.2581. Set limit level of 25 pips
from 1.2571 to 1.2546. Open position executed on Wednesday, June 14,
2006 8:30:09 AM EDT at 1.2571.

Here is the exit:

The price is 1.2548/1.2551.
Close position executed on Wednesday, June 14, 2006 8:31:11 AM EDT at 1.2551.

The trade lasted about 1 minute.  Not bad.

Wim (a visitor of the site) asked a good question today and it has previously been a concern of mine:

Great to see you make some progress with FXengines, however do you
think their news strategies will work long term with FXCM? I doubt
about that since FXCM does not like clients who make money trading the
news. I WAS with FXCM since last friday, they put me on manual dealer
without any reason. Probably, I was making too much money trading news
on short term (4-10 min trades)which they don't like, so, now they want
their money back putting me on their dealers. So, I grabbed my money
back home and opend an account with Oanda.

Regarding trading the
news: if you trade short term and make money on this, FXCM will place
you on manual dealer sooner or later, sad but a true story from myself.
When on manual dealer, well you can forget trading spikes and news
events because they will requote you until you are wrong.

I have posed this question to the CEO of FX Engines to see what we can glean from him. 

Popularity: 1%