NFP Trading Strategies: Trading the Spike

As we discussed above, there are numerous factors at play affecting the interpretation of the NFP number – and armed with a fast data release and superior analytics, you can enjoy success with that strategy. When it comes down to it, it’s always best to follow the charts.

“Trade what you see, not what you think.”

Strategy Rules for: Trading the Spike

1. Use 5 min chart to identify VWAP (using standard 20 period setting).
2. Trade the break of VWAP on the 5 min bar that opens on the NFP release.
3. Use a stop loss of 30 pips from the VWAP break.
4. Exit trade on 5 min candle close.

The objective with this strategy is to identify a specific entry point (VWAP) and look to capture a big pulse in price over the 5 minutes from the release.

Important Points

If the 5 min candle that opens at 13:30 doesn’t break VWAP, don’t enter. This trade is only to be made on the first 5 min candle closing at 13:35, not subsequent candles.

In the next chapter, let’s look at some trade examples to clearly identify this strategy. We will look at the NFP releases over 2015 in both EURUSD & USDJPY on the M5 timeframe, using the VWAP indicator on the standard 20 period setting.