As the weeks and months go by, Pipsblog wants to pass on tips to help you trade the 'Foreign Exchange Markets' more profitably. Today we want to talk about trading on the release of important economic statistics.


First we must be aware of not just the average expectation of the data but what the range of expectations are. These expectations are widely published by economists at brokerage houses and banks. Some of the newswire services will actually publish a list of twenty or so economists and their expectations. Some financial research should be done as to what the recent trend for that data is and how the markets especially in the four major trading currencies (Euro, Swiss Franc, Japanese Yen, British Pound ), against the US Dollar.
Then some financial research should be done to determine if there are revisions to previous months economic data released at the same time. Are these revisions important enough to change currency traders positions and how they trade? Two important economic statistics which fall into this category in the US are the employment data and the inflation data in the guise of the Producer Price Index (PPI) and the Consumer Price Index (CPI). Let us look at the most recent example.

As we saw on Friday with the release of the US employment data, the headline figure of non-farm payrolls at 193k was a little disappointing. Initially the US Dollar dipped, but then the real story unfolded with the release of revisions to the previous months unemployment data and the release of the wages data.
So, what can you do to stop getting whipped by a volatile market? Many online traders and day traders will not actually trade on the headline release of these statistics. They will take note of the headline but will not trade. They will react and trade when they see the release of the revisions to previous months data. This usually means that they are not involved in the initial scramble to trade. If the revisions contradict the headline, they avoid getting whipped; and if the statistics confirm the initial dollar direction they can trade more safely knowing that they are less likely to get stopped out very quickly. This method also has the advantage for online traders that if there is a system breakdown due to the weight of traffic they are less likely to get caught in a position they don’t want and which they can‘t trade out of.


There is another method of trading the currencies which does not require the online trader to be so nimble on his mouse. Before the release of the data sell stops are placed below the market and buy stops above the market to stop the trader in to a position in the market. There is still the danger that the trader can be whipped by this method if great care is not taken where to place the stop orders. A good knowledge of the ‘technicals’ is required for this trading approach.