Introduction
Non-Farm Payrolls (NFP) is a key economic indicator used to gauge the health of the US economy, especially employment. It reflects the change in the number of workers excluding family and non-profit workers. As such, the NFP has a big impact on the forex market, especially on currency pairs related to the US dollar.
What is NFP in Trading?
Non-Farm Payrolls (NFP) is a monthly report released by the US Bureau of Labor Statistics (BLS). It is used by traders at forex brokers such as Pocket Option – https://revieweek.com/review/pocketoption/ to get an idea of the state of the US economy, and in particular, the state of the labor market. The employment rate is an important indicator of economic activity and consumer spending, which make up a significant part of overall economic growth.
Importance of NFP for Traders
NFP is of great importance for traders and can cause significant fluctuations in the currency market. The report can influence market expectations regarding the future interest rate policy of the Federal Reserve System (Fed), which, in turn, can significantly affect the dollar exchange rate. Moreover, this influence is not limited to the currency market. NFP data can also affect the stock market, bond market and commodity markets.
Where to Watch NFP?
You can view the NFP report on the official website of the U.S. Bureau of Labor Statistics (BLS). It is usually released on the first Friday of each month at 8:30 a.m. Eastern Time. In addition, many financial news portals and forex brokers provide this data in real time, along with analysis and explanations of how it may affect the market. This may include trading ideas and strategies that can be applied before and after the report is released.
How to Work with NFP?
Assessing Expectations. Before the NFP report is released, traders should analyze economic forecasts and consider general market expectations. If an increase in jobs is expected, it may strengthen the US dollar, and vice versa. Evaluating expectations allows traders to anticipate the market reaction and prepare an appropriate trading strategy.
Data Reaction. After a report is released, traders should quickly assess whether the actual data deviates from forecasts and, if so, how significantly. This can have a direct impact on market prices, as traders can adapt their positions according to the new data.
Volatility Analysis. Volatility usually increases during periods when important economic reports such as NFP are released. Traders can use this in their strategies, but should also consider the increased risks.
Risk Management. The publication of NFP reports can cause sharp price swings, which increases risks. Risk management, including the use of stop-losses and careful management of position sizes, is key to protecting capital.
Working Strategies with NFP
- Breakout trading. This strategy involves placing buy orders above the current price and sell orders below the current price immediately prior to the release of the NFP report. If the data deviates significantly from expectations, the market can react with a sharp move up or down by activating orders.
- The “fade the news” strategy. This strategy consists of trading against the initial movement caused by the publication of the NFP report. Traders using this strategy expect that after the initial sharp movement the market will “calm down” and return to its previous level.
- The “wait and see” strategy. Some traders prefer to avoid trading directly during the release of the NFP report and instead wait for the market to “digest” the new data and establish new trends that they can then exploit.
- Straddling strategy. This strategy involves opening two opposing positions before the news is released. After the report is released, one of the positions will be unprofitable and the other will be profitable, and the trader may decide to close the unprofitable position and keep the profitable one.
