By Darrell Martin
Most countries track their employment or unemployment rates and release those statistics publicly. The United States releases the Unemployment Rate and the Nonfarm Payrolls Reports each month. Both of these reports will be released on Friday, August 7, 2015 at 8:30 AM ET.
Unemployment Rate
The unemployment Rate is a measurement of the percentage of the total work force that is unemployed. This group of people is actively seeking employment during the previous month. Although there has been a somewhat steady decline in the number of unemployed people in the US over the last couple of years, this report is expected to remain at 5.3 percent, which is the same percent as last month. However, if the report comes out with a higher than expected number, that should be regarded as negative for the USD, while a lower number would signify a positive position for the USD.
Nonfarm Payrolls
Not counting the farming industry, the Nonfarm Payrolls (NFP) measures the number of people employed during the previous month. Tracking this number conveys economic activity and consumer spending. If you were to consult a chart in regards to this number, you would see that over the last couple of years, it has been up and down. This month it is forecast to remain the same as last month with 223,000 as the change in the number of people employed. If the number comes in higher, that is positive for the USD, with the opposite being true if the number comes in lower.
Suggested Ways To Trade This News Event
There are several ways suggested to trade this news event as most of the movement usually happens in the first 15 minutes. However, it is important to go for as much time as you can get to allow the trade time to play out. Iron Condors, Butterflies, Spreads and Advanced Spreads are all suggested strategies for this trade.
Iron Condor
Based on the ranges Apex Investing Institute has had over the past 12 months, the Iron Condor has the ideal minimum profit. The chart below shows the currency to trade, the range over the past two years and the minimum profit based on the last 12 news releases.
Something to be aware of should you choose to trade USD/CAD is the fact that Canada is also releasing their Employment Change report along with several other news releases at the same time. Always be aware of what is happening in the news, whether you are trading a news event or trading in general.
For the Iron Condor, you want to buy a lower spread and sell an upper spread in the same currency having the floor of the upper spread equal to the ceiling of the lower spread. To get max profit, it is best to enter the trade when the market is trading close to where the two spreads meet. Most of the time, the market will move and come back. You can leave your trade on until expiration. Enter using Nadex Spreads as early as 7:00 AM ET with a 3:00 PM ET expiration. Another choice would be to enter at 8:00 AM ET with a 10:00 AM ET expiration. However, this does not give your trade as much time to play out.
Butterflies
A butterfly strategy is performed in much the same way as an Iron Condor, only using Binaries instead of Spreads. Buy a lower binary and sell an upper binary, both in the same currency with the same expiration time. Often the market will remain flat between 11:00 AM and 3:00 PM after the NFP report making it an ideal time to place a butterfly on a Forex currency market.
Straddles
Using the same information in the chart above, if you can pull off a straddle taking profit for a 1:1 risk reward from the market price up to the expected move for the 9:00 AM, 10:00 AM or 3:00 PM (all ET) expirations, that is acceptable and a better trade in many cases. A straddle is opposite of an Iron Condor. You sell the lower spread and buy the upper spread making sure that the upper bought spread’s floor and the lower sold spread’s ceiling are both where the market is trading at the time of entry. Definitely enter limit take profit orders immediately after your entry is filled. Be very aware of deviation levels and take your profit before the deviation level is hit.
Advanced Straddles
If you have been trading for a while, you may be ready to try an advanced strategy: synthetic hedge or synthetic straddles on EUR/CAD or GBP/CAD. This is accomplished by buying and selling a combination of spreads to form your own synthetic combination. Apex’s research has shown that the market moves 100-150 pips on the above pairs during NFP. You would need to watch the EUR/CAD chart for trade management. The biggest move happens in the first 15 minutes 90 percent of the time. Based on this information, you can use 9:00 AM, 10:00 AM or 3:00 PM ET expirations and you can enter anytime between 7:00 and 8:15 AM ET.
For more information on how to set up these exotic currencies, there is a series of articles available. HERE is the link for the article on Synthetic Spread Trading On Nadex: Placing a Straddle Trade. For the introduction to the series, click HERE.
Nadex offers spreads and binaries traded in 49 countries. If you would like further information on how to implement these strategies into your trades, please visit www.apexinvesting.com.