I was really bearish on the USD before the NFP report was released this friday. I thought I saw a number of technical and fundamental signs that indicated a weakness in the USD. I had my plan ready, the big question was if I was going long the EUR or the GBP.
In the world of Forex you can never be sure of anything so I took precautions (even if I already new we would see a weaker USD). I used my favourite setup, the bi-directional break out. The setup is really simple, you submit one entry order in each direction around the current price. I usually do this about 15 minutes prior to the news release (sell stop and buy stop orders). The tricky part is to place the orders at a distance not too close to the current price but not too far away. If it is too close, the order can easily be triggered by the volatility when the news is released, if you place it too far away, you will not make a profit.
I usually take look at the hourly chart and try to get a feel of the avearge volatility the hours before the event. I then select entry levels at a safe distance from the current price. This means you will loose 20-30 pips in the initial move but on the other hand the chances that you enter the trade in the wrong direction is less. The average move of the NFP release is something like 150 pips so I wont mind missing the first 30 pips or so.
The next challange is when to take the profit. I usually sit in the trade for about 15 minutes. This is normally how long it takes for the volatility to settle. It is not rare that you start to see a news fade effect starting after about 15-20 minutes and the price starts to go against you. This really didn't happen this friday but I couldn't afford to take the risk. So, when the volatility started to go down, I close the trade manually.
This is what happened this friday.
The blue lines was my buy and sell stop orders. The dotted red lines was my stop losses. The green line was my take profit for my sell order, my take profit for my buy order was north of the chart.
I entered @1.53047 about 10 minutes later I manually closed down the trade @1.52618 for a nice profit of 43 pips.
