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Trading Articles

NFP dates and how to use the information for better trading

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The non-farm payroll calendar is a crucial element of the American economic picture. The information contained in this update is a vital indicator of the country’s economy, so what are the NFP dates you need to know about and what can you do with the information that is revealed on these dates?

Non-farm payrolls calendar

This report comes from the US Bureau of Labor Statistics, and it tells us the number of people in paid employment in the country. Farmworkers are excluded from it, as are government employees, private household workers and non-profit organisation staff.

These details come out on the first Friday of every month, at 8.30 am EST, which is 1.30 pm GMT.


Key components in NFP

The release of this report is a major event in the world of trading, as it lets traders see crucial information about unemployment trends. It could be viewed as giving us a snapshot of the American economy and whether it’s heading in the direction predicted by analysts.

Naturally, the key information is how many people are in paid employment for the month in question. Part of the reason this matters so much is that it tells us how many consumers are likely to be spending money. It’s a good idea to have the predicted totals and last month’s figures to hand, for comparison purposes. Other details you’ll find out on the NFP dates include the unemployment rate, which is given by sector so you can see it by age, gender and so on. The report confirms average employee wages too, which is useful for understanding whether consumer spending is going to rise or fall and is also a piece of data that the Federal Reserve looks at closely.

If growth is weaker than expected, it can cause a drop in the US dollar or in the value of stocks, while stronger than anticipated numbers will have the opposite effect. However, you should remember an overly-strong dollar can push down the big American stock indices. The way that employment numbers affect the level of demand that is expected for different commodities means that this market is also affected by the NFP report.

Traders might also turn to safe havens, such as gold if the economic data released on the non-farm payrolls calendar schedule shows a poorly-performing American economy.

Non-farm payroll trading strategies

Traders all over the planet eagerly await this report, and they will have a couple of useful strategies ready to use when the data is released.

Fading the initial move

This NFP strategy is about starting to trade oppositely from the direction that the original reaction is moving. This is a short-term trading opportunity that can work because other traders may overreact to the news before taking stock and deciding to reduce their positions.

So, if employment numbers are better than expected, the GBP/USD currency pair could see a short-lived rally. By short-selling GBP/USD with a stop-loss order for the high point of the rally, you can look to benefit if the market falls back to where it was before the report was issued.


Trading the trend

In this case, you wait around 15 minutes or so, until the direction of market momentum is clear. You then follow the direction of the trend as quickly as you can, once you feel that the initial volatility has worn off.

This strategy is typically used when the NFP data is seen to confirm an expected trend. This can often be seen in areas such as the previous recent high being broken upon release of the new employment data.


Past events that had major impact after the release of NFP note

We can see examples in the past of how this report affects the market. For instance, in July 2019 the NFP figures were far better than expected. This sign of strength in the American economy led to the USD/EUR currency pair rising sharply as soon as it was released.

On the other hand, the first report for 2020 was weaker than expected. This led to the USD/EUR pair falling quickly after the NFP was released.


How to trade non-farm payrolls and NFP news releases

The first step here is to understand what to trade. The forex market is where the NFP has the most impact, with all major currency pairs impacted. This is especially true with the GBP/USD currency pair. Other options include stocks and commodities, which also see a reaction to the data released at this time of the month.

A key approach is to first wait for the market to react to the report, as this is likely to be a volatile spell of 15 minutes or so. After this, you will see the direction the market is moving in and follow one of the NFP trading strategies mentioned above.

By following five or 15-minute charts, you can see the range being traded. A 30-pip stop is generally recommended and a maximum of two trades can be undertaken in this way. Most of the movement will occur in the four hours after the release of the NFP reports, so you’ll want to exit in this timeframe or use a trailing stop.

Trading with small amounts and using stop-loss orders are useful tactics for anyone looking to trade on the highly volatile NFP dates for the first time.

Next steps

If you’re interested in trading on the NFP dates listed above, the following information is likely to be of use to you and can help you make more informed decisions on your strategies:

Not investment advice. Past performance does not guarantee or predict future performance.

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