Why I Don’t Trade the NFP
October 6, 2006 by Trader Rich
{mosimage}I used to try to trade these highly volatile announcements, specifically the non-farm payrolls and FOMC interest rate announcements but not anymore. There is just too much going against you to risk it.
- Look at the chart to the right. How could you possibly trade this? It's just beyond unpredictable
- Broker spreads increase
- Broker cannot guarantee execution of any orders including stop losses or limits and in most cases, the broker platform freezes
- Too stressful
I know some traders who stay away from all economic announcements but I don't think this is necessary. There are a lot of announcements out there that aren't nearly as volatile as the NFP and don't have the shortcomings listed above. I don't actively trade the news anymore but if I'm in a trade before the announcement, I usually won't close it just because the news is being released.
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NFP and other news like it are sweet to take profit from. The only thing is that you had to be in market way before. In my case it’s been about a day before. And it’s no wonder - just look at 1 hour charts, put a 12 and 24 hour moving averages on it and you’ll clearly see the entry point and the stop level (BTW in the first seconds after NFP price tested exactly these stop levels…)