What it is
Scheduled events such as cpi, nfp, fomc decisions and earnings-report releases produce the largest, fastest moves of the trading calendar. This playbook does not tell you to buy or sell the number. It is a process for the hour around an event: what to do beforehand, what to avoid in the first minutes, and how to trade the second move, which is the one retail traders can actually access.
The honest summary is that most retail traders should not trade the release itself. The process here is about trading the aftermath.
The logic
The initial reaction to a data print is dominated by algorithms that parse the release in microseconds and by stop-loss cascades. Your order arrives after the price has already moved; you are the liquidity, not the taker. The second move, which begins 5 to 15 minutes after the print, is different: by then the market has read the details (revisions, components, the statement language), and the direction of that second move reflects human repricing, which unfolds at a speed you can trade.
On the other side of a second-move trade are the traders who reacted to the headline and are now stuck on the wrong side of the details, plus the pre-event positioners who were right on direction but wrong on magnitude and are taking profit.
Setup rules
- Preparation (the day before): mark the event time; note the consensus and the prior number; identify the prior day's high, low and vwap and the overnight range; decide in writing whether you will trade the event at all. Prop firm traders must also check their news-trading-rule.
- Market: the instrument most sensitive to the event: index futures and treasury futures for macro prints, the specific stock for earnings, dxy and major pairs for rate decisions.
- Timeframe: 1-minute for the reaction, 5-minute for the trade.
- No-trade window: no new orders from 2 minutes before to 5 minutes after the release. Existing positions are either closed before or held with a stop that assumes a 2 ATR gap.
- Second-move conditions: after the initial spike, price either (a) breaks the post-release 5-minute range in the direction of the initial move with volume, a continuation; or (b) fully retraces the spike and breaks the other side, a reversal. Trade whichever fires first. Do not trade if neither fires within 30 minutes.
Entry, stop, target
Enter on the 5-minute close beyond the post-release range. Stop on the far side of that range. Target is the post-release range height projected once, then a trailing stop.
| Item | Level | Notes |
|---|---|---|
| Pre-release price | 5,000.00 | |
| Release spike | 5,000 to 5,025 in 90 seconds | No-trade window |
| Post-release 5-minute range | 5,015 to 5,027 | Formed 5 to 10 minutes after |
| Entry | 5,027.50 | Continuation break |
| Stop | 5,014.50 | Below range, risk 13 points |
| Target 1 | 5,039.50 | One range height, reward 12, about 0.9R |
| Trailed exit | Varies | Continuation days often run 2 to 3R |
Note that target 1 barely pays for the risk. This setup is a trend-capture trade; its expectancy comes from the trailed portion on the minority of days that trend, and it loses small on the rest.
Position sizing and risk
Assume slippage of two to three times normal and size at half your usual risk, so 0.25 to 0.5 percent of equity, using /tools/position-size with the wider stop. Never trade an event on a funded-account without reading the firm's rules first. Exposure limits from /learn/risk-management apply to open positions carried into an event as if the stop were 2 ATR away, because in practice it is.
What breaks it
- Whipsaw releases. When the headline and the details conflict, price spikes one way, reverses, then reverses again. Both second-move triggers can fire and both can lose. Expect this several times a year.
- Costs. Spreads widen by 5 to 20 times around a release; even 5 minutes later they are elevated. Limit orders only.
- Halts and broken markets. Individual stocks can halt on earnings; options markets can be unquotable for minutes.
- Edge decay. The "trade the second move" idea is well-known and second moves have become faster; the 5-minute range is sometimes done in 2 minutes.
- Regime. In quiet macro regimes, most releases produce nothing tradable, and the discipline to sit out is the whole edge.
How to test it
Build an event log: for the last 24 months of a given release, record the pre-event price, the spike size and direction, the post-release range, which trigger fired, and the move to the close. That alone tells you the base rate for continuation versus reversal for that specific event. Then apply your rules and measure the R distribution with pessimistic slippage. Twenty-four months of monthly releases is only 24 samples per event; pool across events cautiously, and treat any result as provisional. Forward-test in a simulator for at least 12 events before risking money.
Variations
- Earnings second move applied to individual stocks with the extra step of checking implied-volatility; see earnings-iv-crush.
- Fade the overreaction: trade only the reversal trigger, in instruments with a documented tendency to over-shoot.
- Pre-event vol selling is an options playbook, not an intraday one; see iron-condor-high-iv.
Further reading
economic-calendar, cpi, nfp, fomc, earnings-report, news-trading-rule, slippage, trading-halt, whipsaw, trading-plan.
Related playbooks: earnings-iv-crush, post-earnings-drift, london-session-breakout, trend-day-playbook