WHAT IS NONFARM PAYROLLS?
Let's talk about trading on Nonfarm payrolls news. What is this news, why traders always expect it, when it comes out, where to look for it and most importantly why the market fluctuates like crazy when NonFarm Payrolls are released?
What is Nonfarm Payrolls?
Nonfarm Payrolls (NFP) is the number of new jobs in nonfarm sectors of the economy over the past month. The released figures show the dynamics of changes (increase, decrease) relative to the previous period. This statistic covers about 500 sectors of the economy: construction, trade, business services, transportation, logistics, financial sector, health care, tourism and so on. The calculations do not take into account workers in the agricultural sector, non-profit organizations and self-employed citizens. A change in the NFP value of 100-200 thousand jobs will lead to strong volatility in prices of world currencies in pairs with the U.S. dollar, gold and stock markets.
When Is This Data Released?
NFP is calculated and published by the U.S. Bureau of Labor Statistics (BLS), releasing preliminary data on the first Friday of each month. Given the significance and impact of the event on the global economy, a repost of these statistics can be seen on any economic calendar, the primary source is on the BLS website. You can also view upcoming economic events on the popular Forex Factory service. The time of news release depends on the U.S. Bureau of Statistics. A trader should check the exact time and date of release every time, as it depends on the readiness of calculations of the Bureau of Labor Statistics. Any calendar indicates the format of data in the form of three figures: previous, actual value and forecast.
How Does The Market React?
Traders evaluate the released data by several criteria:
• Matching with the forecast or with the previous value. With such figures, a spike in volatility can take place without a strong and directional short-term movement;
• Strong changes cause global shifts such as reversals or strengthening of long-term trends, changes in historical volatility values.
Job growth is a leading indicator of growth in the U.S. economy. New hands in an office or manufacturing facility is the last stage of preliminary work done by a company to expand its business. By this time, it has:
1. Attracted investment
2. Expanded production capacity or sales departments for already purchased products
3. Growing employment leads to US GDP growth, low nonfarm payrolls data is a sign of a coming crisis
This is clearly seen in the graph of all employees, built on the dynamics of changes in NFP since the beginning of the calculation, where the areas of global economic crises are marked.
Why Does The Market "Fly" On Nonfarm Payrolls ?
Significant price changes occurring in the Forex market when macroeconomic indicators are released are due to the lack of support for prices by market makers.
During the release of important news, there is no need to support market liquidity, as the attention and funds of large players are attracted. As it was said above - the value of the indicator is a signal for revision of long-term trends, so huge amounts of funds are put in motion.
The absence of a market-maker leads:
• Spread widening (distance between buying and selling prices);
• Low volumes of nearby orders in the stack.
Therefore, the inputs of large players literally "collect the stack" at the moment of dismantling orders at all price levels, the same applies to the exit from positions. The market moves by 50-150 points, which is an acceptable error for long-term positions, but it is killer for stops, which limit losses of intraday traders.
Roughly speaking, the market "flies" during the NFP release because it is relatively easy to move the price at this time. And not because all traders of the world are panic selling/buying currencies.
What Should You Do If Nonfarm Payrolls Are On The Calendar Today?
There's only one 100% profitable way to trade the nonfarm payrolls! So how do we trade them?
YOU DON'T. Yeah, that's right. If you see the NFP coming out today, then:
- When trading intraday, close all positions half an hour before the news comes out
- When trading long term, remember that the average price movement is 50-60 pips and the maximum is 150-200 pips. This should be taken into account, it is possible to change the stop loss
- Remember that after an average of 6 hours the price often returns to the same level as before the news
An interesting point: if you study many strategies, you will see that on bigger timeframes (H4, D1), news carrying changes can serve as a trigger. The market plays back the data in a "second wave", after the volatility calms down, market makers will start accumulating positions on the flat movement. The tactic is called "step" at the end of fluctuations in a narrow channel there is a strong impulse and directional trend, actively shifting the markets to new price levels.
Conclusion
Let's summarize the rules of 100% profitable strategy of trading on Nonfarm Payrolls. Half an hour to an hour before a major news release, simply clsoe all positions. Even if there is a small loss, it is probably better to close them. Two hours after the Nonfarm Payrolls release you can trade again in a normal mode. But since it is already Friday and evening, there is no sense to trade. So, an hour or half an hour before the nonfarm close all positions and go to rest.
What is Nonfarm Payrolls?
Nonfarm Payrolls (NFP) is the number of new jobs in nonfarm sectors of the economy over the past month. The released figures show the dynamics of changes (increase, decrease) relative to the previous period. This statistic covers about 500 sectors of the economy: construction, trade, business services, transportation, logistics, financial sector, health care, tourism and so on. The calculations do not take into account workers in the agricultural sector, non-profit organizations and self-employed citizens. A change in the NFP value of 100-200 thousand jobs will lead to strong volatility in prices of world currencies in pairs with the U.S. dollar, gold and stock markets.
When Is This Data Released?
NFP is calculated and published by the U.S. Bureau of Labor Statistics (BLS), releasing preliminary data on the first Friday of each month. Given the significance and impact of the event on the global economy, a repost of these statistics can be seen on any economic calendar, the primary source is on the BLS website. You can also view upcoming economic events on the popular Forex Factory service. The time of news release depends on the U.S. Bureau of Statistics. A trader should check the exact time and date of release every time, as it depends on the readiness of calculations of the Bureau of Labor Statistics. Any calendar indicates the format of data in the form of three figures: previous, actual value and forecast.
How Does The Market React?
Traders evaluate the released data by several criteria:
• Matching with the forecast or with the previous value. With such figures, a spike in volatility can take place without a strong and directional short-term movement;
• Strong changes cause global shifts such as reversals or strengthening of long-term trends, changes in historical volatility values.
Job growth is a leading indicator of growth in the U.S. economy. New hands in an office or manufacturing facility is the last stage of preliminary work done by a company to expand its business. By this time, it has:
1. Attracted investment
2. Expanded production capacity or sales departments for already purchased products
3. Growing employment leads to US GDP growth, low nonfarm payrolls data is a sign of a coming crisis
This is clearly seen in the graph of all employees, built on the dynamics of changes in NFP since the beginning of the calculation, where the areas of global economic crises are marked.
Why Does The Market "Fly" On Nonfarm Payrolls ?
Significant price changes occurring in the Forex market when macroeconomic indicators are released are due to the lack of support for prices by market makers.
During the release of important news, there is no need to support market liquidity, as the attention and funds of large players are attracted. As it was said above - the value of the indicator is a signal for revision of long-term trends, so huge amounts of funds are put in motion.
The absence of a market-maker leads:
• Spread widening (distance between buying and selling prices);
• Low volumes of nearby orders in the stack.
Therefore, the inputs of large players literally "collect the stack" at the moment of dismantling orders at all price levels, the same applies to the exit from positions. The market moves by 50-150 points, which is an acceptable error for long-term positions, but it is killer for stops, which limit losses of intraday traders.
Roughly speaking, the market "flies" during the NFP release because it is relatively easy to move the price at this time. And not because all traders of the world are panic selling/buying currencies.
What Should You Do If Nonfarm Payrolls Are On The Calendar Today?
There's only one 100% profitable way to trade the nonfarm payrolls! So how do we trade them?
YOU DON'T. Yeah, that's right. If you see the NFP coming out today, then:
- When trading intraday, close all positions half an hour before the news comes out
- When trading long term, remember that the average price movement is 50-60 pips and the maximum is 150-200 pips. This should be taken into account, it is possible to change the stop loss
- Remember that after an average of 6 hours the price often returns to the same level as before the news
An interesting point: if you study many strategies, you will see that on bigger timeframes (H4, D1), news carrying changes can serve as a trigger. The market plays back the data in a "second wave", after the volatility calms down, market makers will start accumulating positions on the flat movement. The tactic is called "step" at the end of fluctuations in a narrow channel there is a strong impulse and directional trend, actively shifting the markets to new price levels.
Conclusion
Let's summarize the rules of 100% profitable strategy of trading on Nonfarm Payrolls. Half an hour to an hour before a major news release, simply clsoe all positions. Even if there is a small loss, it is probably better to close them. Two hours after the Nonfarm Payrolls release you can trade again in a normal mode. But since it is already Friday and evening, there is no sense to trade. So, an hour or half an hour before the nonfarm close all positions and go to rest.
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