Day-Trading the Non-Farm Payrolls NFP Report

what is nfp forex

It managed to get to the 2x target but not the 3x target before the 4-hour time limit for the trade. Below is a video of a recorded session while day trading the NFP on November 4, 2022. There was more potential on this day, but I was recording a video and wanted every trade I took to be a little more perfect than usual. The video is below (after the charts) and provides lots of tips for live trading and what to look for and avoid.

what is nfp forex

Don’t place and hold day trades through the NFP announcement. It is essentially gambling because even if you pick the price direction correctly, the bid-ask spread can widen so much in the seconds leading up to and following the announcement that you get stopped out anyway. You’ll learn ways to make money trading actively, using a 1-minute chart and grabbing multiple trades. As a result, the indicator serves as a base for the future rate decision by the Federal Reserve. The ADP (National Employment Report) is an estimation of nonfarm employment which is based on a survey of thousands of private sector businesses. One of the biggest differences between NFP data and ADP data is the sample and methodology of the study.

What is NFP Forex

It’s not unheard of for the EUR/USD to move 30 pips within the first few minutes after the report’s release. The bigger the initial move, the better it is for establishing the direction the pair is going. Specifically, these jobs counted include those from the manufacturing, construction and goods producing economic sectors.

what is nfp forex

As such, the NFP report shows the strength of the US labour market over a given month and often creates enormous volatility in the currency market. The Federal Reserve follows the report closely to determine future adjustments to its monetary policy. A better-than-expected NFP report could signal that the economy is overheating and that the Fed needs to tighten monetary policy, i.e. hike interest rates, to cool the economy down. As with many other economic indicators, the difference between the actual non-farm data and the figures expected by economists will often determine the overall market impact. If there are any major surprises or disappointments, which deviate from expectations, the forex market will likely react to the new reality by adjusting prices and exchange rates.

Position Sizing

The market may move aggressively in one direction and thus may be beginning to fade by the time an investor gets an inside bar signal. In other words, if a strong move occurs before the inside bar, it is possible that a move could extinguish before a signal. During high volatility times, rates can reverse quickly even after waiting for a pattern to set up. Since the NFP data is a predictor of American employment, the data release has the greatest impact on currency pairs, including the U.S. Dollar (EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, and others).

There is also the need to factor in what the report will mean for underlying interest rates in the US. For example, just because there are 200,000 new jobs created in the prior month, isn’t necessarily going to be enough information for us to trade-off. That’s because the moves that occur based on the NFP report are based on what the market was expecting.

US May Nonfarm Payrolls Preview: Analyzing Gold price’s reaction to NFP surprises

When the USD appreciates, the exchange rate rises and the currency paired against the USD falls. Using primarily TC trades, this day produced 8R (8% if risking 1% per trade) in profit within 1 hour of the news release. The active strategies that follow can produce much bigger profits and provide more trades, but require more screentime and focus. The strategy explained above allows to maximize your profit and reduce the risks during the increased volatility.

  • If the currency traders buy euros, day traders begin to take short positions.
  • This release causes considerable changes in the forex market.
  • Prior to the release, you should identify key support and resistance levels on a minute chart.
  • If you decide to trade the actual news release, make sure to always use stop-losses and be prepared for large price movements immediately after the release.
  • The Securities and Exchange Commission might bring the next bearish crypto wave over the market.
  • If necessary, the inside bar’s high and low are used again for a second trade.

If the currency traders buy euros, day traders begin to take short positions. Currency traders will begin purchasing dollars hoping that the value will continue to increase. If the employment rate increases and payrolls other than farmworker decrease, the traders view it as a weakening dollar and will buy into the euro. The EUR/USD is the most heavily traded currency pair in the world, typically providing the smallest spread and ample price movement for making trades. The reason for this is that the currency prices fluctuate enough that there is an opportunity to make a profit on the movement of this currency pair without worrying about others. The NFP is a widely watched news report and you can almost always see that volatility is drying up when investors are waiting for the release.

Day-Trading the Non-Farm Payrolls (NFP) Report

This is why I always set a profit target that is a multiple of my stop loss. That way, over many trades, even if only winning 40% of trades, for example, the wins cover the losses for an overall profit. This strategy takes little effort, but the overall profits are pretty small too. The NFP only comes out once per once month, so there aren’t a lot of trades. Any given trade could be a nice winner, but over the course of the year, this strategy won’t make you rich. In this way, these are just EURUSD strategies, which could also be used for trading the non-farm payrolls release.

The nonfarm payroll report is a primary indicator of the health of the U.S. economy. Non-farm payroll figures give economists a sense of how healthy the job market is. For day traders, non-farm payroll reports are important because they are a catalyst for volatility.

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