Trading on the news can bring huge profits. But in return, the trader runs a high probability of losing a deposit. It also applies to Nonfarm Payrolls, US statistics on unemployment, and nonfarm employment. When publishing, there is a rapid change in quotes, which is expected on the first Friday of each month.
Nonfarm Payrolls Concept
The name of the news block came from the English Nonfarm Employment Change. The indicator reflects the situation on the labor market of the United States of America: how many new jobs appeared in the manufacturing sector over the previous month (except for agriculture). The forecast and actual data are estimated.
Nonfarm Payrolls has the following characteristics:
- It takes second place in importance after GDP and is always marked with the High index.
- The news is displayed on the economic calendar at 16:30 (15:30, depending on the time of year) every first Friday of the month.
- After the publication, significant changes in quotes occur, the technical analysis (TA) algorithms are violated, and the trends of currency pairs change.
There is an unwritten rule: shortly before the publication of Nonfarm Payrolls, disable advisers and not use strategies based on technical analysis of the market. Earnings on news leaps can only be done by researching fundamental data.
How to Trade on Nonfarm Payrolls
The usual trading methods at the time of publication of Nonfarm Payrolls become irrelevant. Indicators are late, candlestick figures lose their value, and graphic sketches of trends or levels have to be removed and applied again. Moreover, after the completion of fluctuations, it is recommended to wait at least one hour to make sure that the formation of new trends is completed.
When trading at the time of the release of Nonfarm Payrolls, it should be borne in mind that:
- market makers do not support quotes at the time of publication;
- enormous funds of massive players are attracted to the game for changing the trend;
- the spread gets the property to expand dramatically (unpredictably by the number of points).
The market is moving up 50-150 points. It often exceeds the average volatility of currency pairs, so intraday trading practically freezes. You can get a stable income only on long-term strategies, where such surges occur within the trend channel and do not particularly violate the overall planning.
At your peril and risk, short-term tactics lovers are connected to the trade. But they expect the dangers of accidental triggering of the stop due to false breakdowns characteristic of the first seconds. There are also excessive slippages that increase the losses from the Stop Loss order, which worked too late.
Closing orders at the Take Profit level (by profit) also sometimes happens not in favor of the trader. Everything suggests that for trading with news taken into account, it is better to choose long-term strategies or temporarily exit the market until it calms down and new trend forms.
Which currency pairs to choose
Almost all currency pairs, instruments related to metals, cryptocurrency react to the news release in the USA. Regardless of the underlying or quoted asset, the second will be USD (US dollar). Typical examples: EURUSD, GBPJPY, USBJPY. The formal exception is cross-pairs, for instance, EURJPY. But the conversion of the rate in them still occurs through the US dollar.
The best choice for Nonfarm Payrolls is considered to be a significant pair with minimal volatility. It increases the predictability of the asset’s behavior while reducing risks. It is often limited to a couple of euro/dollar. Its average volatility is at the level of 100 points per day, so the price jump either transfers the quotes to the range opposite to the current trend. And changes the trend, or confirms it, allowing traders to make good money on the trend.
Manual and automatic trading at Nonfarm Payrolls
There are two approaches to trading on Nonfarm Payrolls. One is based on placing pending orders on either side of the current position. At first glance, this is an easy way to make money, but in practice, a trader is faced with a whole list of risks.
The following factors can add to the problems:
- Orders of type Sell Stop and Buy Stop according to the regulations, are opened “at the first affordable price.” At the time of publication of the news, substantial slippages often occur that reduce profit.
- False breakdowns can “hook” both orders, and then Lock will appear on the market (one deal is in the positive, the other is in the red). The way out of the situation without fixing losses can take a week or even more.
If you trade on an account with a floating spread, the order may open later than the point specified in the Take Profit order. Then, on correction, the deal closes at a loss. Moreover, it often happens at such a speed that the trader does not have time to react to the situation.
The second method is associated with the need to conduct fundamental analysis. When reading financial news, you can notice the specifics in the preliminary discussions of the results of last month. But this requires constant attention to world news. Sometimes both methods combine: pending orders are placed in the direction of the expected jerk. To reduce the risks of losses, they do it stepwise so that the volume grows only in the course of real movement.
Then the presence of open opposite transactions will have little effect on profit because their volume will be less and overlap with profitable orders. As soon as the opening in the right direction occurs, traders usually delete orders directed in the other direction. But on the news, priority is given to major players on the server’s response to actions in the terminal, so manual steps have to be repeated several times.
Robots help to simplify trading somewhat. Even if you are confident in the forecast for Nonfarm Payrolls, it’s difficult to close the opposite pending orders quickly. Move the Stop Loss order higher than the open price, or force a deal to close when the estimated number of points is reached manually.