Trading the Non Farm Payroll Report Like a Savage Pip Fiend, by Rob Booker

I guess that some people will take Rob's mentoring program, and then expect to perform great after the program is over. It is not how it works, you must also do your own homework and testing to find out what is comfortable for you. Though Rob may give you his own strategies and ideas, its ultimately up to you to work on it. I have seen many systems presented here and in other forums where traders have had great results whereby I cannot attain, what may work for them, may not work for me or the other trader. You must find your own niche, and not go trade blindly without putting any effort into it.

Just my two cents worth....

Rob,

Can you update us on how your NFP system performed today and how we would manage the position for the rest of the month?

First of all, the 'system' is preliminary (which is why I wanted to reward someone to be able to share improvements -- and to restate what I've been saying -- the developer of the improvements owns the improvements, gets the money, and shares the basics with everyone, but might sell the advanced version or something like that). So my thoughts about this so far are based on a lot of research, but I am still not comfortable that it is all the way done.

Second, based on what I have completed, here are my thoughts:

1. Today's move lower starts us thinking about short trades. But before I'm willing to say I'm confident about a short trade, I'll need to see the GBP/USD flatten out (which it will often do after a big NFP day of moving) over the next 12-24 trading hours. We're specifically looking for a traditional flag-type pattern for those of you who like price patterns and are familiar with S/R.

2. If the pair, after that 12-24 hour consolidation period, breaks through the obvious consolidiation lower, then it triggers a short trade with a stop back as far as 1.9450 or even higher (I'll update with exact numbers as this plays out in the next couple of days). The profit target? 300 pips has been an average so far, but I'd be willing to trail the move with a 75 pip stop and see if there is more to be had. I'd want to at least protect 150-200 pips.

3. With all that said, the alternate version of trading the report that I have, which is described (basically) in the ebook, would have taken a short trade at 1.9303 this morning, at the close of the first 15 min candle after the report. The pair fell as low as approximately 1.9270. Traders who trade that system have the option of taking 30-40 pips and getting out and staying out, or keeping a wide stop as described above and holding on for those 300-500 pips. I haven't finished enough research to say that holding for the huge move is going to work out, but the data is looking pretty good so far.

Once again, it's important for me to emphasize that I did the NFP research to spark interest in longer term trading from the report, and de-emphasize shorter term trading that has become more and more risky over the past 24 months.

So to wrap up that point, I did not write the ebook or do the research to present a complete system that is going to produce a trade every month -- but rather to encourage and reward longer term, more patient analysis. That said, I did have some preliminary conclusions and am happy to share how it all plays out here and in my blog simulanteously.

My secondary goal was to take any interest that is sparked in longer term trading and encourage people to build their own systems using the data that I provided. Whether they enter the contest or not is not as big of a deal. But for those that do enter the contest, I'm hoping to give them money, they get the credit, and they can launch a site or provide an email address where people can contact them to get details -- I am not planning on posting, owning, selling, or even teaching that system. I'll direct interested people to the place where they can get the basics on the system that won.

I can't state this enough: short term trading during the news, while not impossible, has become much more risky over the past year (more details in the ebook about the NFP). And I find that more of my students who do mid-to longer term trading are more patient, more confident, less stressed, and in the end more profitable.

I will update everyone in the next day or so with more thoughts about the NFP move!

I mistakenly assumed that you had some idea about how we should trade this report since the title of your book was "Trading the Non Farm Payroll Report Like a Savage Pip Fiend." The spreadsheet that you produced shows you making 2356 pips so it seems that you've certainly given this some thought. Do your results include spreads, commissions, or slippage? It seems like that might be an occasion where a trader would experience those nuisances. What is left to do before you would call this a system? Maybe the title should be something like "I'm looking for ideas on how to trade the NFP."

Sounds good to me. Is this part of your testing that you did or you just believe that this is the best course of action given current market conditions?

I'm not familiar with the alternate version. Should we have already taken profit? I thought you wanted us to hold the trade for the entire month.


If the market did reverse, at what point would we go long and what is our current stoploss location? I saw losses as high at -305 on your spreadsheet.
I also noticed that 1 winner accounted for almost 50% of your profit (May '06). That is usually a red flag for system developers.

That is very generous of you. But, to be fair, you do get a lot of publicity out of this so it's not a total loss for you

The Alternate System
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Oops. I was not clear enough about what I meant here. Thanks for asking for the clarification. The alternate system was the new york box system. That system is described in the ebook itself. And what I'm adding here, and that I did not explain in my previous post, is that many people who take NY box trades take profit at 30 pips or so.

Does that mean that it's necessary to take 30 pips? Or must be done? Or that I only sanction that perspective? No. It just means that there are a lot of people who do short term news trading, of the NY box variety, and that is where they would get out or move the stop to break even. But the purpose of the research is to find ways to hold on longer, not to do this short term trading, and it made things more confusing. I am sorry that I even caused any confusion about what I meant here.


My NFP System isn't Complete
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The ebook is REALLY clear about what I am trying to accomplish. Here is a direct quote from the ebook:

¡Warning!
This eBook provides:
1. Charts from the last 4 years of NFP reports, for the GBP/USD, USD/JPY, and the EUR/USD;
2. Test results from my own ideas for longer term NFP systems;
3. Ideas on where to go next to develop systems.
This eBook does NOT provide a complete, end-to-end trading system that you can use today. But it gets close to doing that. If you dedicate the time and effort to do your own research, you will likely improve greatly upon what I’ve done and discover some great ideas for trading the report in the longer term.
Last of all, you must test your own theories (or these theories) before you do any live trading. Make sure you prove or disprove your theories about movement in the market, before you risk losing any of your money. It’s simply not worth testing expensively, with real money.

I hope it is abundantly clear that there are weaknesses in the preliminary system that I did. That's why I asked for help in working on it and I'm willing to reward someone with $1,000 for helping (but once again, they keep the rights to the research). That is exaclty what I am trying to communicate here, that there is a loss that is too great, too much emphasis on a single trade that was the big winner. That it can be improved. That I got close to building something that works well, but not close enough. The ebook was written to encourage and reward discussion, exchange, research, longer term trading.



Conclusion
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I very much appreciate your feedback and your desire to help me be clearer and more helpful. You do mention that "to be fair, you do get a lot of publicity out of this so it's not a total loss for you." That's absolutely true. If posting in this forum were a total waste of time, no one would do it. But I think you might be referring to the fact that the publicity that comes from doing the ebook will probably result in financial gain for me (if this is not what you meant I apologize, but I think I'm reading it right).

There is speculation that I am a self-promoter, or that I gain more than I give for these types of ebooks and things. It's true that I have an ego. It's true that I enjoy doing this type of stuff. It's true 100% that giving away this information is not a total loss for me. I get great feedback from traders, I get to improve systems that I have used that are imperfect, I get the satisfaction that I have helped other people.

I spent scores of hours together with my intern to take screen shots of charts, to accumulate historical data, to backtest preliminary strategies, and then I gave it away for free, offered $1,000 to someone who wants to improve it and they would own it and could sell it and get tons of credit for doing it. If it still appears that the only reason I did all of this was to make more money, then I'll keep working on stating my true intentions in a more credible fashion, by doing more to help for free in the message boards, by producing more research and posting it, and by doing what it takes to make sure people understand that although I might get a lot of attention, that I truly want to see traders succeed, and I want to help them do that.

I absolutely, 100% agree that I gain a lot from these things that I do. If part of that gain is financial, and that is offensive to some people, then I'm okay with that. But at the same time, to be fair, I hope it's clear that the entire amount of research is free, I've not held something back about this system that costs money, I am offering $1,000 in a contest, and I just love what I do and working with other traders, whether or not they give me any money for anything.

If there is anyone out there who feels that I did this for the purposes of self-promotion, then all I can say is that of course this research, because it has my name on it, promotes me. But hopefully, it mostly promotes good trading, new developments, and profits for more people. I will do my best to prove through more help, more interaction, more discussion, that I am genuinely interested in the success of others.

Thank you for your feedback and I hope your trading week was awesome!