NFP and Economic Calendar
NFP or Nonfarm Payroll report is a major economic indicator in the United States that represents the total number of paid employees in the U.S. except the workers who are working on farms, the federal government, private households, and nonprofit organizations. The NFP indicator is released on the first Friday of every month. Nonfarm Payroll is known for shaking the Forex market every single time it is published. This consistency is a motivating factor for many traders to trade NFP and other major news events. This type of trading is also called news trading.
Whether you are trading Forex, stocks, or any other asset class, there is one common thing you need to know. Whenever trading financial markets, you should watch for the Forex economic calendar that provides key macroeconomic information. Using an economic calendar it is possible to track all the upcoming major economic indicators like NFP, GDP, central banks' interest rates, and many more. An economic calendar is a trading tool that provides time and date for all upcoming fundamental news events that can impact the prices of Forex and other markets heavily. In Forex, trading without an economic calendar is like trying to control a ship's direction in a storm without GPS and maps.
Dangers of NFP and news trading
As we have mentioned, news trading refers to a trading approach in which a trader waits for important upcoming news that has a high chance of making markets volatile and then trading the Forex or other markets. As you can guess, this kind of trading can be extremely dangerous. One way why this is the case is when there is high volatility, the price tends to create what are called gaps. The gap is when the price jumps from one point to another, making a space between the two prices visible on the charts. Gaps are dangerous because the price can move past the stop loss and traders can lose more than what they intended in the beginning. This is why it is not advised for beginners to trade the news, and only experienced traders should undertake this tricky task.
The proper way to trade the NFP
One way to trade NFP and other highly impactful news is to take a look at the past market moves during the news. How was the price behaving when the indicator came out on the previous Friday? Analyze at least a year of NFP data and its impact on Forex prices before you can even think about trading the news. Since the prices tend to move in both directions rapidly, it is possible to set pending orders at certain prices and set your targets tiny while the stop loss must be wider so as not to lose the trade too quickly. In this way, the traders set pending orders in both directions and wait for the price to trigger the order. But, still, this type of trading is very risky as the price can move so fast that it is possible to trigger both orders and still lose money in the end.
➔ NFP or Nonfarm Payroll is a major U.S. indicator that measures the number of paid employees that are not working in farms, government agencies, nonprofit organizations, and private households.
➔ Nonfarm Payroll is released on the first Friday of each month.
➔ NFP has a record of consistently shaking the Forex markets and causing major price movement almost every single time it is released.
➔ Trading news is extremely dangerous because of high volatility, which can cause gaps. Gaps tend to move past the stop loss without triggering it, resulting in major losses.
➔ The only way to trade the news is to analyze past data on NFP’s impact on price movements.
➔ The pending orders with wide stop loss and tight targets can be a way to make a profit trading the news, but there are very high risks involved.