Nadex Trade of the Day - Trading into the US Jobs News (February 6. 2015)

On the first Friday of every month at 8:30am EST, the US Jobs reports are released, including nonfarm payrolls and the unemployment rate. It is very risky trading into these reports and unless you have a really good strategy for trading into the news, it's probably a wise decision to sit on the sidelines.

Every morning, I trade the the 7am-9am Germany 30 (DAX) strategy with Nadex binary options. This strategy was based on the observation from a veteran trader who remarked that the 7am EST hourly candlestick of the Germany 30 (DAX) Index is a pivot point that determines the direction of that market for the next hour or so.

Here are the rules for the strategy:

• Select the 7am-9am EST Nadex time period for the Germany 30 (DAX) Index.
• If the 7am EST hourly candlestick is BULLISH, then BUY at the first Nadex strike price available BELOW the opening price of hourly candlestick.
• If the 7am EST hourly candlestick is BEARISH, then SELL at the first Nadex strike price available ABOVE the opening price of hourly candlestick.

This is a very simple strategy that is remarkably consistent. Just be patient and watch the 7am hourly candlestick develop. Once it's confirmed bullish, then buy. If it's confirmed bearish, then sell. If you want to be "super-safe", don't make a trading decision until 8am, after the 7am hourly candlestick has closed.

With the pending US Jobs reports due at 8:30, extreme caution trading this strategy was warranted.

Click on Nadex Chart to Enlarge

7:00am - The market had been chopping sideways going into the 7am-9am time frame. The 7am hourly candlestick of the Germany 30 (DAX) market opened at 10833.667, and started grinding upward be fore retracing in the back half of the hour. The 7am hourly candlestick closed slightly bearish at 10831.833. Almost a Doji. Under my trading rules for the strategy, that triggers a SELL at the first strike price ABOVE the 7am opening price. But I was nervous about the looming 8:30 economic news reports. The following pending orders were placed:

1. SELL at >10849 (1 contract): Risk $50, Reward $50
2. SELL at >10869 (3 contracts) Risk $79, Reward $81

Courtesy of Investing.com. Click to Enlarge

Now it was time to wait for the economic news reports. All of the reports came in bullish, with the exception of the unemployment report (Jan), which slipped from 5.6% to 5.7%.
The market spiked bullish at 8:30, filling both pending orders. Then it pulled back. Notice the huge wicks on the 8:30 candlestick on the 5-minute chart. At 8:35, the market spiked very bullish, blowing past the SELL order at 10849 .

At 8:45, it appeared obvious that the 10849 SELL order was not going to expire in the money, so the trade exited early for a $29.50 loss. The SELL order at 10869 was breached briefly, but then the market retraced and expired at 10855.467, settling  in the money for the 10869 sell order.

The result of these two trades netted a small net profit of $28.10 after exchange fees were deducted. The 10869 sell order was essentially an insurance policy  if the 10849 sell order failed.

In hindsight, I have a few thoughts about trading into the monthly US Jobs reports:

1. For maximum safety, don't trade into this the monthly US Jobs reports, or any other high impact economic news reports.
2. If you do trade, wait for the reports to be released. In today's example, placing a BUY order at 10829 after 8:30 would have been much safer.
3. If you follow the rules of this strategy, jump one level up the price ladder if you are trading into the news, instead of selling from the first strike price above the 7am open.

If you strictly followed the rules of the 7am-9am Germany 30 (DAX) strategy, and SOLD the market at the first strike price ABOVE the 7am opening price, then your trade would have been a loser. Be very careful trading into the news.

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The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

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