Trading around news releases: NFP, CPI and central bank decisions

A few minutes a month cause a large share of forex's biggest moves: the release of key economic data and central bank decisions. Those minutes can make a good trade, but they also do things to prices and orders that surprise newer traders. Here's what happens and how to deal with it.

The releases that matter most

• US non-farm payrolls (NFP): usually the first Friday of the month at 8:30 a.m. New York time. Canada's jobs report often comes out at the same moment, which makes USD/CAD especially lively.
• US CPI (inflation): monthly, also at 8:30 a.m. New York time.
• Central bank rate decisions: the US Federal Reserve, the Bank of Canada, the European Central Bank and the Bank of England each meet about eight times a year. The press conference after a decision can move markets as much as the decision itself.
• GDP, retail sales and PMI surveys: smaller, but they can still move a pair sharply when the result is a surprise.

An economic calendar shows the time, the forecast and the previous result for each release. The market moves on the surprise, the gap between the forecast and the actual number, not on whether the number is good or bad.

What happens to prices and orders

• Spreads widen. Liquidity providers pull back just before a release. A spread that is normally under a pip on EUR/USD can be several pips for a minute or two, and much wider on gold.
• Prices gap. Price can jump from one level to another without trading in between.
• Stops slip. A stop loss is an order to close at the next available price once your level is reached. If price gaps through it, you're filled at the next price, which can be well beyond your stop.
• Whipsaws. The first move is often reversed within minutes as the market digests the details.

Three sensible approaches

1. Stay out

For most traders, especially beginners, the simplest approach is to avoid opening new trades in the 15 to 30 minutes before a major release, and to wait until spreads return to normal afterwards. You miss some moves. You also miss the worst fills.

2. Protect open trades

If you already have a trade open and a release is coming, decide in advance what to do: close it, take partial profit, or move the stop to breakeven if the trade is far enough in profit. Don't remove the stop to avoid being whipsawed. That's when you need it most.

3. Trade the reaction, not the release

Instead of guessing the number, wait 15 to 30 minutes and trade the move that holds once the dust settles, with a normal stop and normal size. The first spike is mostly noise. The trend that follows is often more tradable.

How we handle news in our signals

We note major releases in our channel, and we avoid sending new entries just before them. If an open signal runs into a big event, we post an update on whether to close, reduce or hold with a protected stop.

Before every trading day

1. Check the calendar for high-impact events on the currencies you trade.
2. Note the times in your own time zone. Daylight saving changes them twice a year.
3. Decide in advance what you'll do with open trades.
4. Size any trade near news on the assumption that the stop may slip. A smaller position is the simplest protection.

Our guide to trading sessions explains how news fits into the shape of the trading day.

Risk note: trading forex carries a high level of risk and may not be suitable for everyone. This article is for education only and is not financial advice.