Announcement Straddle Trade
Economic announcements can produce some high volatile price breakouts (and Whipsaws). These are generally high risk times which many traders avoid and often choose to close any open their deals prior to the announcement. The Payroll trade on the 1st Friday of every month is a particularly high volatile announcement. It takes considerable trading competency and experience to trade high volatile economic announcement trades.
The following is a way of trading these announcements:-
* Establish the exact time of the important announcement.
Confirmation of the importance of the announcement will be a narrow range bound price movement (30 pips) with a bear or bull trap (false break) before the announcement.
* 2 minutes before the announcement input entry orders to straddle the current price (buy +15 to 20 pips / sell –10 to 15 pips).
* Wait for the break and cancel the inactivated leg of the straddle (or use it as a stop).
* Alternatively buy and sell market orders can be activated 2 minutes before the time and stops moved within 15 to 20 pips from the price just before the announcement.
Many brokers’ systems cannot cope with the fast movement of the price so make sure that your broker is comfortable with these type of trades. Brokers often increase the spread on currencies to discourage this trade. Always check your spreads before doing this trade.