Learn Trading for Free and Without Registration

An Online Glossary to Study Trading Independently

Traders' Favorite Indicator - Nonfarm Payrolls

Trading on Non-Farm Payrolls News: A Guide for Traders

Trading on news, especially during the release of Non-Farm Payrolls (NFP) data, can bring significant profits in a matter of minutes. This key report in the U.S. economic calendar is rightfully considered the second most important after GDP data. However, to trade NFP successfully, it is essential to understand its impact on the market and follow proven strategies.

What Are Non-Farm Payrolls?

Non-Farm Payrolls reflect employment data outside the agricultural sector in the U.S. This report is a critical indicator of the economy's health, as it directly reflects its ability to create jobs. The gap between forecasted and actual values often leads to sharp movements in currency markets, particularly in pairs involving the U.S. dollar.

How Does NFP Affect the Market?

Strong NFP data (above 200,000):
- Indicates a robust U.S. economy.
- Leads to a rise in the dollar’s value and strengthens the U.S. currency.
Weak NFP data (below 200,000):
- Signals economic challenges.
- Causes the dollar to weaken.
Significant discrepancies (over 30,000-40,000):
- Trigger high market volatility.
- Currency pairs like USD/JPY can move dozens of pips within seconds.

Strategies for Trading on NFP

1. Using Pending Orders

This strategy is ideal for minimizing risks while capitalizing on sharp price movements.

Steps to follow:

Place two pending orders (Buy Stop and Sell Stop) 15-20 pips away from the current price a few minutes before the report’s release.
Set take-profit and stop-loss levels to limit risk.
When the data release causes significant price movement, one of the orders will activate and capture the trend. Close the trade once your profit target is reached, and cancel the inactive order.

2. Trading USD/JPY and GBP/USD Currency Pairs

These pairs are particularly sensitive to NFP data. Avoid EUR/USD as simultaneous news from the Eurozone may neutralize the effect of NFP.

3. Trading Gold (XAU/USD)

Gold is a popular asset for aggressive traders. It reacts with significant price jumps to NFP, especially when the actual data significantly deviates from forecasts.

How to Interpret NFP Data?

If NFP exceeds forecasts by 80,000 or more, it usually drives the dollar higher.
If NFP falls significantly below forecasts, the dollar weakens, and USD-related pairs move against the dollar.
When discrepancies are minimal, the market may remain relatively calm.

Example of Trading on NFP

Using the USD/JPY currency pair as an example:

Scenario: NFP data exceeds forecasts by 82,000.
Outcome: The Buy Stop order activates, and the price moves upward by more than 40 pips in one minute. Profit is taken at +35 pips.

Key Tips for Trading on NFP

Monitor the Economic Calendar. NFP data is released on the first Friday of every month at 8:30 AM EST (15:30 Moscow time).
Analyze Unemployment Claims. These figures are a key signal for predicting NFP performance.
Practice Risk Management. Never increase your trade volume beyond what your account can handle.
Be Prepared for Surprises. Market behavior may shift before the release as participants price in expectations.

Why Trade on NFP?

High Volatility. NFP can move markets by dozens or even hundreds of pips in minutes.
Short-Term Profit Potential. With the right strategy, traders can earn significant returns in a short time.
Predictability with Analysis. Historical data and economic indicators allow for highly informed predictions, despite inherent risks.

Conclusion

Trading on Non-Farm Payrolls is a powerful tool that every trader should consider. With proper preparation and adherence to proven strategies, this approach can yield consistent results. However, as with any trading, it’s crucial to be aware of the risks and act with discipline.

Stay informed, plan your trades, and turn volatility into a source of profit!