Why trade the Non Farm Payroll?
The NFP gets a lot of bad press but is still a massive event risk and key economic indicator. This report systematically furnishes some of the greatest price moves in comparisson with other news data. A lot of dealers. analysts, day traders, funds etc follow this report and it therefore often brings about volatility in the FX markets.
This data statistic which is explored and later reported by the United States Bureau of Labor is thought to comprise the sum figure of workers of all business concerns in the US aside from a few areas including government and nonprofit.
The NFP data generally arrives close to the first Friday of every month.
Traders approaching this event-risk from a calm objective perspective based on how the market has responded a buffer period after the release can potentially furnish them with more orderly results than just predicting the apparent movement based on the figure released. Some moves will escape the trader but this is the nature of trading the financial markets.
Attention must be payed to trading psychology as these events can be highly charged. The purpose of a systemetic approach is to minimise emotion and think in terms of probabliity.
– Here is an example strategy that could potentially be traded from a 15-minute chart.
This is not a trade recommendation but only an educational example of how the NFP can be approached. Practice this on demo account only.
An important filter is that the NFP news would have to be in the direction of the current trend on a 30 minute chart which is one timeframe higher than the trigger candle.
1. Wait for a 15 minute candle after the NFP news release.
2. After the bar forms the trader should now wait for a forex price action signal
3. The stop loss goes above below the price action trigger setup bar.
4. Any open trade is closed at the end of day or can be trailed with bollinger bands, psar etc.
There is no exact science but risk should be low and reward high as whipsaws can cause many losses so reward needs to be suitably high.
This is not a trade recommendation but only an educational example of how the NFP can be approached. Practice this on demo account only.
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