NFP Trading Strategy

Why the NFP Matters to Us

All our experienced currency traders, futures traders, stock traders, and top option market traders wait and analyse the NFP data keenly. NFP release affects all asset classes, including stocks and currencies.

The movement of the US dollar impacts other global assets because the United States has the most important and largest economy worldwide. The economic policy decisions set by the United States Federal Reserve can make the payroll data considerably vary from one month to the other.

Changes in the market participants view can initiate volatility in the financial markets. In this case, volatility leads to better profit potential and more trading prospects. Due to this, team of professional traders incorporate good NFP trading strategies that exploit the initial volatility to enjoy an outstanding profit potential.

How We Trade Using the NFP Data

A high figure in the NFP economic data release indicates the US economy is in a good position. Therefore, the US dollar and stocks stand to benefit. On the contrary, a low reading displays a negative economy in the country. Nonetheless, the unexpected happens where the market fails to follow the policy makers projections. Our Team of professional Traders take other factors into consideration, factors such as market expectations and unanticipated uncertainties.

A general NFP report also measures the monthly change of the following:

  Private payrolls

  Unemployment rate

  Average workweek

  Average hourly earnings

  Participation rate

A few days before the actual release of the NFP figures, Pro-traders get a forecast of what to expect from headline news events.

Should the NFP figures be higher than the expectations, it depicts a strong economy, leading to higher-yielding currencies, especially the dollar. On the other hand, a figure below the forecast shows a weak economy that hurts the dollar.
The market adjusts its price based on the actual news release of the NFP data. So, a huge NFP miss translates to a big market spike. Whether the real NFP numbers are below, above, or conforms to the market expectation, the market adjusts price movements based on that data to get the best possible outcome.

NFP Trading Strategies

With countless investors/traders from all walks of life watching the release of NFP figures, any non-farm employment change results in a price change, either up or down, based on how close the real number is to the forecasts made before the news release. This makes non-farm payrolls popular trading essentials for indices and forex traders searching for a potential profit from their investments.

Currency Pairs Affected by NFP

NFP data affects all major currency pairs that contain the US dollar as a counter currency or base currency. Some of these currency pairs include EUR/USD, USD/CAD, GBP/USD and USD/JPY. Traders must adjust profit targets and stop losses accordingly and calculate the average volatility of the earlier NFP releases before initiating a trade. For example, a major mistake is to use the same stop loss for GBP/USD and USD/CAD. Still, following the NFP report release, the major currency pairs described above are our best to trade.

* The US Dollar The NFP report affects the US dollar most. Whenever it’s trending positively, traders can anticipate the dollar to display bullish behaviour.
* Gold The NFP effect on the price of gold stems s from the dollar impact. A high NFP supports the price of gold, provided physical or industrial demand exists within the economy.
* Indices The NFP affects individual stocks, and that impact is mainly felt in the indices. A robust non-farm payroll figure pinpoints vital turning points and trends in bear markets. A weakening NFP, on the other hand, particularly on low wages, shows changes in the bull market conditions.
* Oil As an economic indicator, the NFP impacts the demand for oil, gas and energy. A positive report leads to high energy use in homes, industries, work and travels. However, it’s tricky for NFP to determine the direction of oil price appropriately on its own.

Experts’ Final Say

The NFP is undeniably a vital monthly report for forex traders regardless of their skill levels. It is also one of the trickiest sets of data to use when trading. While it contains a short-term effect on the price and market movements, its benefits come from the long-term analysis. The wage inflation trend, job growth trend, and unemployment trend are by far more valuable than other month’s data. Investors can trade the NFP figures across various asset classes with Green Earth.