The non farm payroll number is one of the few pieces of pre market data that I actually trade, moves are usually significant one way or another and if there’s no opportunity pre market then it usually opens up a new trend in the RTH.
The number came out and it was perceived as weak, the market fell. I never chase this move you just don’t know if the market will pop right back up again. Instead I wait for a good few minutes of trade at the new repriced levels. That way you can be more sure that the move is not just a spike and a genuine reprice.
Two one minute candles later and it became clear this was a genuine move. Trade setup activated. Now I am looking for a pullback that fails, turns and pushes back down. Usually you can see this on the tape: Offers will get lifted as the market pushes up and then it will reach a pause level, offers will get thicker as sellers become interested but only passively. The market may rock back a few ticks before probing those sellers again, this is the make or break point and the trigger for your trade entry. If those sellers start to reload offers and ultimately hit the bid becoming more aggressive then the trade is on. This happens in seconds and you need to be 100% focused taking in the speed of the tape and the movement of orders on the DOM. Bids will then start to get pulled and the down move starts.
When I see all of this I get short with a market order, I might try my luck with a limit a few ticks above the market to try and get the last push from the bulls, but you are in danger of missing the move as it will happen so fast.
Stops are above the last swing high that was just made. It’s very important to stick to your stop on this sort of play as I’ve seen markets that setup perfectly on the short side only to rocket through all the highs. It depends how the guys with the biggest bankroll perceive the number.
You’re trying to front run the bigger players and by jumping in on the pullback you are looking for the slower moving sellers to press the market to new lows. That was the target for this trade, new lows. Close out into the panic bars and leave a small position on for a home run.
We didn’t need to wait long and in three minutes the market was testing the prior low and flushing out any buyers. That was my queue to get covering.
I was a bit late this time with my exits, I was looking for a deeper move under the low and the tape turned so quickly it cost me. Nevertheless the entry was good enough to give me room to breathe and I still banked a nice 29 and 40 point trade on most and stopped out breakeven on my small “runner”
I managed to grab a chart and tape screenshot just after my entry and exit.
Over the weekend I will give a run down on the rest of the trading day, how I got it completely wrong at the open 3 times in a row before I nailed it!