Trading CPI: Managing the Binary Event Risk Effectively

CPI is a clean example of a binary event. Here's how to manage the risk: **Pre-release risk inventory:** 1. List all open positions sensitive to USD/inflation 2. Calculate total direction: are you net long USD or short USD? 3. Reduce to 50% of normal risk exposure by the morning of release **Specific pair sensitivities to CPI:** • Most sensitive: EUR/USD, USD/JPY, Gold, S&P 500 • Less sensitive: GBP/USD (BoE has own inflation story), commodity pairs **Stop loss width for CPI day:** Normal EUR/USD stop: 25–35 pips CPI day EUR/USD stop: 50–70 pips (2× normal). Size down proportionally. **Post-release entries:** Wait 3–5 minutes before entering. If EUR/USD dropped 60 pips, the "good entry" for a continuation short is on the 30–40 pip pullback — not chasing the full 60-pip move. **The "I didn't have a view" rule:** If you genuinely don't know whether CPI will beat or miss, there is no trade before the release. Enter only post-release on confirmed direction. How do you size positions differently for CPI day?