Thanks Thomas - that's very clear.

David

You're welcome David....good luck with your trading.

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The 4-hour chart shows that the EUR/GBP has pulled back off of the high down to support and seems to have reversed back to the upside. Traders could buy above resistance and place their protective stop below support. I also have an hourly chart posted below to get a closer look at the move from the high down to support. This chart shows three highs between resistance and support which could also provide entries for more aggressive traders. The first buy could be on a move up through the first level of resistance just above the .9150 area. The second buy could be on a move up through the second level of resistance just above the .9200 area. One could also wait and buy on a move up through the third level of resistance just above the .9250 area. The choice is up to the trader and their confidence level in the strength of this trending move on the daily chart. But all entries should include a protective sell stop below support with targets to take profits set as twice that risk for our 1:2 risk:reward ratio.

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Hi Thomas

I notice that resistance 1 on your 1 hour chart coincides exactly with the 50% fib retracement line from the 24/09/09-27/09/09 upmove.

Someone somewhere is looking at those fib points.

Great post as usual

Thanks

David

Beautiful Charting Thomas.
I am long at 0.91514, Stop at 0.90760 and Limit at 0.92997
Regards.

Good point...thanks for sharing.

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Good luck with your trade! Thanks.

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Thanks Tom. I was looking at GBP/CHF which shows similar opportunity. Really appreciate ur support.

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I was looking at that pair also, but have been concerned about the Swiss National Bank intervention in the EUR/CHF and the possible influence on the other CHF pairs, especially the GBP/CHF. That did happen this morning which resulted in a GBP/CHF rally. I am just not sure how long the central bank intends to keep their currency weak, so I have been passing on these pairs. It is a nice chart though and hard to pass up, but limiting our risk should be our highest priority.

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OK. That was a good point. i always try to limit my risk just as u said. thanks again.

Sounds good....you're welcome.

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This piece has been posted before in this forum, but I like to remind traders of what is happening this Friday, October 2nd at about 830AM Eastern, which is when the US Department of Labor will release the most anticipated news report of the month, the US Nonfarm Payrolls. This report can result in increased volatility and a chance to profit handsomely in a short period of time.

However, more often than not, new traders are not the one’s profiting but rather losing. The main reason is slippage, which is when your order is filled away from the price you wanted. The reason for slippage is simple, big traders stay away from these events and new traders all try to do the same thing at the same time. If the release is bullish for the EUR/USD, everybody wants to buy at the same time. However, most find that there is nobody willing to sell to them at their price. But eventually your order is filled, but at the seller’s price. Soon you find the market moving against you and you exit to keep your losses from getting too big. But what about those who were selling to you? As the market continues to fall, you start to wonder about these traders who sold to you and the fact that they are now making money. What did they do differently?

These traders were playing the reversal and taking advantage of the fact that the first move after a release is often based on emotions and wrong. Here is a 5-minute chart and an example of a reversal after the release of the Nonfarm Payrolls. We can see that just before the release, the EUR/USD was trading at 1.4892. After the release, the market started to rally up to near the 1.4940 level. The market then started to reverse and traders who were playing the reverse sold at the price the market was trading just before the release. The assumption here is that all traders who bought after the release are now in a losing trade and are selling to get out. So these new traders sell at 1.4892 to get in and use a 50 pip stop with a 100 pip limit order to take profit, which is what we recommend in our DailyFX Power Courses. This is our 1:2 risk:reward ratio and allows us to be profitable if only winning 40% of these setups. The market soon moved down 100 pips from the 1.4892 entry and rewarded those who were patient and reacted to the market environment rather than the emotional first response to the release. These reversal traders will also use the EUR/USD as much as possible in these situations because of the increased volume and better fills. But you don’t have to be first to get into the trade to be right, you just have to be patient and react to the market and not the news release. The EUR/USD doesn’t act like this on every release, but it does frequently enough to make this a valuable strategy.

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Good day Tom. I was trying to study ur post of this nonfarm payroll strategy over the weekend. I dont trade this news cos i got burnt several time so i decided to stay far away from my a/c when this news comes up. But i have some question as regards this strategy and what happened on friday cos what happened on friday was so similar to ur strategy but in opposite direction.
The news was suppose to be $ bullish (bad news; strong dollar) and euro was trading @ 1.4530 b4 the news and went down to 1.4480 just after the news b4 coming up above 1.4530 and higher. SO the question is regardless of the news, when euro retraces to where it started just b4 the news we can enter and place our appropriate stop. Thanks

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Ok Tom i got it now. The news was suppose to make $ bullish but people got in too early based on emotion and all we have to do is trade the reversal. This one so worked perfectly well.

Hey Afo

Thats correct, we want to be on the other side of the trade(market reaction) and not on the emotion side. So as our dear friend Tom suggested, wait few minutes after the report and see how the market reacts. If it jumps to one side of the trade too fast and aggressive, then those traders are the trading emotionally. We just need to wait and react after a few minutes after the news.
But remember Afo, this doesn't work all the time but MOST of the time. I always trade this news but with a tight stop of 50pips with 1:2 risk reward method.

Thanks

Kingsley