Forex Signal (Wednesday November 30, 2011 – 8:15am EDT) – ADP Employment Change

[Stavro D'Amore]

Hello

We have ADP employment change due to arrive today please see my trade plan below.

ADP Employment change
Forecast 113k
Previous 110K
Pair to trade: USD/JPY

Numbers we need:
BUY USD/JPY 158K
SELL USD/JPY 68K

Economical Impact: High
Typical Result: Good for Currency
Occurrence: About 2 days after the month ends
Spike Probability: Good, we can see 40 pips on initial spike

About our Triggers:
US ADP Employment Change forecasted to arrive at 113K
We are looking for a deviation of 45K either way on this trade.
If we get 158K or better I will look to enter LONG position on USD/JPY and if we get
68K or lower I will go SHORT on USD/JPY.
Should this report be triggered, we can expect to see about 40 pips on the initial spike. We have no known conflict for this release. This trade will have a good chance of a 30% retrace on the initial spike

What is it? And why does the market care?
Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity. The ADP Employment Report is a measure of the monthly change of private employment, based on a subset of aggregated and anonymous payroll data that represents approximately 400,000 U.S. business clients. This release arrives two days before the government-releases employment data. This is a good predictive to the government's non-farm payrolls data. The change in this indicator can be very volatile.

A higher than expected reading should be taken as positive/bullish for the USD,
A lower than expected reading should be taken as negative/bearish for the USD.


Method I use to trade this:
Stavro D’Amore Trading Method

Felix Trading Indicators:
See Felix indicator descriptions

I do recommend spike trading as an option. Liquidity is very good at the moment if you are using an ECN broker. Please use no more than a 15 pip limit order to control slippage.

I will look for a 30% retracement in the original spike before entering. I will be looking at a 5 minute chart. I will sell half my position as soon as I hit the original high point of the first initial spike and place a SL at the original spike price.

My TP level would be just before a resistance level or if the chart decides to form a support level, looking at a 15 minute chart time frame to analyze this.

Historical Chart and Data for US ADP Employment Change

All the best

Stavro D’Amore

 

[Stavro D'Amore]

Hi Guys,

Ill be doing a webinar/Online seminar today so I wont be in the forum should you need to contact me in regards to the trade plans or anything else, I can be contacted either by PM or on my email stavro.damore@hotmail.co.uk

all the best

Stavro D'Amore

 

[Louis123321]

Seems even though it came out at 206k+ it is being majorly cut short and conflicted with the unexpected BC decision. It is a shame!! This would of been a great trade if not for the China basis cut ..

 

[matiplo]

Hi PipDog,
I hope I will be able to catch you here. Could you please look on this thread https://www.forexpeacearmy.com/fore...ime-4-30am-edt-uk-retail-sales.html#post77421 and respond to my posts? I'm interested in your opinion about what I wrote...

 

[PipDog]

Response to Matiplo

Hi PipDog,
I hope I will be able to catch you here. Could you please look on this thread https://www.forexpeacearmy.com/fore...ime-4-30am-edt-uk-retail-sales.html#post77421 and respond to my posts? I'm interested in your opinion about what I wrote...

So I think you're asking me basically...if stocks are up, does that alone imply a 'Risk On' enviroment, or something like that...?

Here's my opinion: Making a call on Risk appetite in the FX markets is at least as much art as science. Stocks go up and stocks go down. There are too many forces in play to completely answer why any given day it's up or down. Have you heard of the Yen Carry Trade (do some research on this to understand the dynamics in play)? There was a period from about 1/2001 to about 7/2007 where the GBPJPY was being driven up by the Carry Trade...it went from about 150 to about 252 in that period. Heck, it went from about 200 to 252 from 5/2006 to 7/2007. That period was the absolute peak of Risk On that I have ever seen. Then, sometime after July 4, 2007, the GY started down and fast. This was the beginning of a period of Risk Aversion. The GY went from about 252 to 118 by 1/2009. It bounced to about 163 by 5/2009...another good Risk On period. Since then, it's been down all the way to 117, and is currently at about 122. The stocks markets followed the lead of the GY over this time period, usually having a 2 month lag. It's an interesting correlation...that I have used to get into and out of stocks. This is all about the Risk Appetite of the markets...stocks, bonds, FX.

During a Risk On period, I found it risky to go against the grain on FX trades...for instance selling the USDJPY, GY...but, I can't count the number of times I've made hundreds of pips (per trade) on FX news trades...WHEN I WENT WITH THE RISK APPETITE. And that has worked both during Risk On and Risk Off periods.

Right now, looking at the global stock markets, the volumes, the FX charts...I see Risk Aversion. Investors of the world are scared of risky assets. Even today, the DJIA went up like 490 points....sure the GY, GU, EU, AU have all went up. But not that much. I'd still be leary of going against the risk appetite, and what I still see it Risk Off.

So, back to your question...in the near future, there will be days where stocks are up...but I think that going against the current Risk Aversion enviroment on any FX news trade will be a tough way to make money. For a news trade to work well, you need 'follow through' with the pair you're trading. When that follow through is against the grain the Risk Appetite...you may be setup to lose money. Try keeping a log of trades and market reaction for the pair you're trading...I think you will see what I'm speaking of.

At some point, the Risk Appetite will change back the other way. Just not yet and probably not for a while.

 

[matiplo]

During a Risk On period, I found it risky to go against the grain on FX trades...for instance selling the USDJPY, GY ...but, I can't count the number of times I've made hundreds of pips (per trade) on FX news trades...WHEN I WENT WITH THE RISK APPETITE. And that has worked both during Risk On and Risk Off periods.


I don't understand these senteces...
I thought that terms: Risk On and Risk Appetite mean the same - that we go short usd
and Risk Off and Risk aversion also mean the same- we go long usd....

But from your post appears that during Risk Off and Risk On periods we can go with Risk Appetite.... I don't understand this sentence at all....

 

[PipDog]

During a Risk On period, I found it risky to go against the grain on FX trades...for instance selling the USDJPY, GY ...but, I can't count the number of times I've made hundreds of pips (per trade) on FX news trades...WHEN I WENT WITH THE RISK APPETITE. And that has worked both during Risk On and Risk Off periods.


I don't understand these senteces...
I thought that terms: Risk On and Risk Appetite mean the same - that we go short usd
and Risk Off and Risk aversion also mean the same- we go long usd....

But from your post appears that during Risk Off and Risk On periods we can go with Risk Appetite.... I don't understand this sentence at all....

Risk appetite simply is the prevailing Risk direction of the markets at the moment...could be Off/Averse or On. Like your appetite for food...sometimes hungry, sometimes not. Appetite does not imply a direction. It's up to you to determine which direction is predominant...or the appetite of the moment.