Advanced NFP Strategy
As the NFP is such an important release, it will often set the tone for USD action over the following days, either in a trend continuation or a short-term reversal. VWAP is incredibly useful if you are looking to stay in the trend longer to catch more profit. As price expands and pushes into the outer standard deviation bands of VWAP, we often see price consolidate in that direction before it returns to test the VWAP.
This test of the VWAP can either see price bounce and continue again in the direction of the breakout, or indeed simply cross back through VWAP and reverse the direction of the breakout. The key to the advanced strategy is looking to stay in the trade until that retest of the VWAP occurs. The retest usually occurs over the next few hours, and is more than enough time to increase the net profit on the trade.
Another benefit to this trade is that it will hopefully negate any latency in your entry point, meaning that you are more likely to still net a good profit (on winning trades) even if your entry is out by 5 or 10 pips.
So the advanced version of the NFP strategy is as follows:
- Enter as price breaks the VWAP on a 5 min candle that opens at 13:30.
- Exit the half position at the close of the 13:30 5 min candle at 13:35.
- Move your stop on the remaining position to entry (breakeven).
- Exit final half as price retests the VWAP.
We won’t go through them all again, but let’s just look at a couple of examples of this advanced version of the strategy.
USDJPY March 2015
For the image please refer to the video at 2:35
In the chart above, we can see that using the advanced version of the strategy allows us to capture exit profit on the trade. We bank half our profit at + 38 pips and a further half at + 83 pips, giving us a total net profit of 60.5 pips, and a 60% increase in realized profit.
USDJPY April 2015
For the image please refer to the video at 3:40
In the chart above, we can see that using the advanced version of the strategy again picks up extra profit. We bank half our trade at + 35 pips and the remaining half at + 46 pips, giving us a total profit of 40.5 pips, an increase of 16%.