How to trade CPI in forex

Which instrument are you looking to trade on the CPI? A lot of it will depend on that.

Also, I would not advise you to go scalping on the CPI report, because the stops would be quite large that you would make losses. Instead develop a strategy with an edge, so you don't have to think what to do & can simple execute it on the CPI day.

A breakout or a false break of the first 15M after the CPI data release does have an edge on EUR/USD, DAX, NASDAQ & some other instruments.

For example, this was the last CPI day on 15th Jan 25. Mark the high, low of the first 15M i.e. the news candle 1:30 - 1:45 PM GMT. And trade a break or a false break of this on the lower TF. In many cases, a break to the one side can take even hours.

And stop go behind the last 15M. The strategy has some edge on the CPI day.

If you are developing any strategy, go back & look at all the CPI days in the last 3-4 years on the instrument you want to trade. That would be just 36-48 charts on any particular instrument.

Then look for patterns in the price.

Note: Ignore the line of the chart with the price. Focus on the 2 red lines at the high & low.

For me, when trading CPI I like to keep it as simple as possible. I use my demo account to check how much it will cost me to open a 0.01 lot size for the instrument while still maintaining a Margin Level of 150%.

I then fund my account with just that amount and nothing more, so that even if price moves against me I wont lose too much..

I open my trade 1 minute before CPI is released & most importantly I use a Trailing Stop Loss with a 1 point custom interval.

The Trailing Stop Loss is important because once CPI data is released, the trading platform may freeze and you will be unable to use it.

I am not sure if the brokers intentionally disable the platforms when CPI is released or if the freezing is due to system overload.

The Trailing Stop Loss is automated & secures profits for you no matter how fast the price surges. It adjusts your stop loss as price moves in your favor.

I don't use manual stop loss when trading CPI because manual stop loss does nothing to secure your profits. Manual stop loss only limits your losses. But when trading CPI you must secure profits as the price moves in your favor because the price can reverse very fast and you loose everything.

So for me, this is the strategy I use: I put in just enough money to cover initial margin and maintain a 150% Margin Level, then I set a "Trailing Stop Loss" to secure profits in fast moving markets.

From the question, I don't think the OP was asking about risk. What you have explained isn't a trading strategy, but more of a risk management approach for trading CPI news. I do agree with some points though.

But the question I think was related to how you would trade the CPI report, and position yourself in order to take advantage of the volatility during the news release.

Overall, I do think risk management is really important, and you would need to have a volatility adjusted stop loss. As i mentioned, you would put stops behind the last 15M high/low, and adjust your position sizing according to the capital you want to risk.

So, if you have USD 100 in your account, and can risk 10 USD on this trade, and to stop has to be 20 pips, then you can trade 0.05 lots.

Great strategy but does it work with NFP too?

I've not tested it on the NFP, but you can test it. I think it should work.

This is the 15M of the last NFP. If you look at it, there was no break on either side after the NFP, so there was no objective buy or a sell.

But on the December NFP, there was an objective sell signal (second chart). Similar on first Nov. NFP. Move on one side & then a reversal. You could also, fade the first 5M high low with a small SL.

So, you can backtest & build your strategy around this.

Update: The CPI first 15M fade trade was okay today with small SL.

The high & low of the first 15M of the CPI news. The Fade move is to take the first opposite PA, which was the Bullish engulfing 5M.

The idea is to trade a low SL, so only trade the edges or a break.

The other move is to trade a break, where you wait for a break to one side of the 15M.