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Non-Farm Payroll Forex Strategies

Non-Farm Payroll Forex Strategies

The United States releases the non-farm payroll report on a regular monthly basis.  It is based on the total number of employed, paid workers excluding government employees, employees in private households, non-profit organisation employees and farm employees.  It is a vital economic indicator for the U.S.

This report is the cause of consistently large foreign exchange rate movements.  Few of the other news announcements in the market cause this sort of movement.  This is the reason for the anticipation of the report in this financial market and the potential impact it will have.  As there are so many interested parties in this report, even if the number that it reports is in line with the estimates, it often causes large swings in the forex rate.

News Release Trading

Trading on news releases could become extremely profitable trading methods and forex strategies, but it is not to be tried by the faint of heart.  Speculation on the direction of a specific currency pair when news releases are made can be extremely dangerous.  It is however often possible that the rate swings that occur eventually subside.  This settling down period allows traders to capitalise on the market after speculators have taken huge profits or losses based on news announcement volatility.

NFP Forex Strategies

The non-farm payroll report normally affects all the major currency pairs, but the pair that is most affected is GBP/USD.  It is however possible for all traders to capitalise on this data release.

The first step is to wait for the forex market to understand the significance of the information.  Once the initial panic swings have taken place and forex market participants have had time to digest the information, a trade in the direction of the main momentum should be placed.  Wait for a signal that shows that the market has chosen a particular direction in which to swing the rates.  This prevents an early entry rush and decreases the chance of being whipped out of the current market prior to the choice of direction.

This strategy can be traded on five or 15 minute trading charts.  Choose one of the time periods only as signals could appear at different timeframes.

  • Do not act at all during the first bar after the report has been issued
  • This first bar will have a wide range
  • Wait for the inside bar to appear after this first bar – it may not necessarily be the next bar
  • The highs and lows of the inside bar prepares the groundwork for the trade trigger
  • Once a bar closes below or above the inside bar, place a trade in whichever direction the breakout occurred.  A trade can be done once the bar has moved beyond the low or high, without waiting for the closure of the bar.  Stick to one method only
  • Place a 30 stop on that trade that you have entered
  • Enter a maximum number of two trades.  If they both are stopped out, do not re-enter the trade.  If you need to do a second trade, use the low and high inside bar levels, if necessary

Your target should be on time.  Most of the movement in this case will occur within a period of four hours.  An exit is made about four hours after the entry time.  If you wish to remain in this trade, you should make use of a trailing stop.

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