News unextreme scalping
It can be seen on the example of news trading (in this case NFP) that almost every attentive and disciplined trader can earn gradually on such price movements. The principle of "careful" or non-aggressive trading is described below in this article. This method is good in case when you have any doubts regarding the direction of the market movement or when you just need to keep your funds safe.
This principal is universal and can be used not only for news trading.
In this case the M1 timeframe is used. There is no necessity to argue about its appropriateness because this timeframe doesn't have any differences with other ones, except the limited time for making a decision by trader. The fibo-levels, trends, channels have the same behavior everywhere.
The moment of news release
As we are speaking about non-aggressive trading it is not recommended to set breaking Buy Stop or Sell Stop orders before the news release because there is a possibility that after the orders open the further sharp reversal of the market to the opposite direction will take place. Sometimes sharp unidirectional movements may take place but nobody can be sure what level the price will reach, whether it will stop or change it direction after the initial impulse.
The methods to determine the extrema or the pivot points are not considered in this article. The reason is that these methods are used only for aggressive trading.
The price has made a traditional (in most cases) jerk up and down (or vice versa). We mark the limits of this movement (50 points). These levels are very important as you can set breaking stop orders few pips above the maximum and below the minimum, taking spread in consideration. In case one of the extrema will be broken you will get at least 35-40 points.
The first price rollback
The following figure shows a train of thoughts and some of the actions which should be taken by the trader. With the help of Fibonacci lines we determine the size of the rollback and its further direction. After the 76.4% level has been crossed, the Fibonacci level is ready.
Then the 61.8% level is crossed. At the level of 50% the traditional rollback takes place. Will it be a reverse here? No, the chart comes back and abuts against 50% level several times and then moves down under the 38.2% level. When the price comes lower the 23.6% level it is time to think about selling.
Just above 50% the chart bounces and fluctuates between 76.4% and 61.8%. Something may be wrong because there is no sharp breaking of the news impulse upper limit. That's why it is required to set one more Sell Stop at the price 1.2185. At the price 1.2217 you can see the double top.
Will the reverse take place?
There is such possibility. Look at the Fibonacci level on the next figure. It has appeared when the price crossed 1.2217 level and come closer to the level 1.2200. Only traders with experience would be able to sell in this situation when some caution is needed. That's why we set Buy Stop a little bit upper then 1.2217 level specularly taking the spread in consideration, the order is set at 1.2222.
Meanwhile the price has not reached several points to the Sell Stop which is set at the 1.2185 level and has formed a figure similar to the converging triangle. This means that in this situation it will be better to wait till the price moves beyond the news extrema.
Finally we have two Buy Stop orders at 1.2222 and 1.2229, two Sell Stop orders at 1.2185 and 1.2172.
Have broken out
Everything except the targets is shown on the figure. After breakout has taken place and the afternews range under 1.2186 level has been tested, the Buy Stop orders should be removed.
And after the breakout of the lower limit of the initial news range the Sell stop orders have been adjusted to the price 1.2170.
As a result of intraday sell orders have been closed by Take Profit at 1.2103.