Did you get a margin call last Friday?
I certainly hope not. I reminded again and again about the extreme risk when it comes to trading during the US Non-Farm Payroll. This is probably not a good method to make money in forex.
In the previous review, we noted that the US NFP data was much better than expected. Immediately there was a knee jerk reaction in favor of the US Dollar followed by a counter move. The flip flop could have easy wiped out trades on both sides.
Looking at the EUR/USD chart above, we see a move of almost 200 pips during the December 2010 US NFP! As the move was mainly bullish, traders speculating on a bearish move would have been devastated.
Although the US NFP came in positive, the increment of jobs was just 39k. A much higher increase was expected. This caused concerns as investors struggle to make sense of the data due to other strong economic outlooks. The ultimate rain to the parade was the unemployment rate. It increased to 9.8% and once again brings the US close to the dreaded 10% unemployment rate. As employment is crucial to consumer spending, risk aversion towards the US economy developed and the US Dollars was sold as seen above.
A number of the forex trading koalas mentioned to me that their positions were wiped out when they tried to counter trade the bullish jump. Looking back at the chart above, the currency pair never receded from the bullish momentum. I always feel that it is not advisable to try to catch tops and bottoms.
Trade Safely.
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Related Forex Articles from the Koala Forex Training College.
- The US Non-Farm Payroll and the EUR/USD
- The US unemployment crisis
- Forex Mistakes : Picking tops and bottoms
