How To Trade Unemployment & Non-Farm Employment Change With Low Defined Risk
On January 10, at 8:30 am EST the US Bureau of Labor and Statistics released the Unemployment and Non-Farm payroll numbers.
The unemployment number was expected to maintain and come in steady at the same level as last month at 7.0 percent.
The Non-Farm Payroll (NFP) number (new jobs excluding farming) was expected to come in slightly lower at 196k.
So, traders have to understand the impact of the numbers.
If the Unemployment Rate drops, the markets should rise. Likewise, if the NFP number is better than expected, the markets should rise.
Traders must also be aware that good number could be seen as a threat to quantitative easing and raising of interest rates, so the markets could fall even on good numbers.
Bad numbers may indicate to the markets that the Federal Reserve will not back off and may even increase its quantitative easing and delay raising interest rates.
Bottom line: traders have no idea what the markets will do when the numbers come out, even if the numbers were known in advance, the market reaction is still unkown.
So what to do? Go by the old adage "don't trade into a number," and sit aside and watch the market fly and pass by?
What if it was possible to trade in such a way that it did not matter what direction the market went?
Let's look at how to take advantage of this. What traders do know is that the EUR/USD, GBP/USD and USD/CHF move on average over 100 pips high to low within two hours after the Unemployment and NFP report.
- Using Nadex Binaries, traders could buy a binary above the market and sell a binary below the market about 15-30 minutes before the news release at 8:30 AM ET.
- Traders would choose an expiration of either 10-11:00 am or 3:00 pm, as these are the only ones available. The further out the better, as traders have more time for the market to move, but thedr may cost more, so traders want to compare them for a cost/benefit analysis.
Choose Strikes and Submit Entry Orders
- The cost will need to be less than about $25 for the combined sides (i.e.: long strike $12.5 risk and short strike $12.5 risk)
- Traders will need to choose strikes that are within 100 pips or less from where the EUR/USD is currently trading. The closer the better.
- It is important to get both sides filled near/at the same time as you have no idea what direction the market will move.
Set Take Profits
- Once the set is filled, take profits take at 1:1, so a risked total of $25 + the risk on the opposing side (as you expect it to either move up huge or down huge)
- Example: Risk 25 + Risk on other side is 12.50. So traders need to make $37.50 gross on either side in order to make the $25 return on the $25 risk.
- Once filled on the sell side at $88.50 (for a $12.50 risk), traders will need to set a take profit order to buy back the contract at $50
Then sit back and let the market do its thing the bigger the move the better.
Nadex is a US-based CFTC regulated binary exchange (the CFTC is who regulates the CME etc..). On Nadex binaries, the markets are open from as early as 6:00 pm ET to as late as 5:00 pm the next day, giving the ability to trade day and/or night on intraday, daily and weekly contracts. Traders can trade binaries on forex, US and international stock index futures, and commodities like gold and oil.
If you would like to learn more about trading Nadex binaries check out this 16 video course absolutely for free on Marketfy.
To see examples of trading on Nadex binaries and spreads, see these articles posted on Benzinga, click here.
To learn more about how to trade binary options and for indepth binary trading strategies, tools and trade rooms visit Apex Investing which is a service provided by Darrell Martin. You can find it at ApexInvesting.com
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