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July 9, 2020

IronFX, What is the NFP (NonFarm Payrolls)?

Why NonFarm Payrolls (NFP) is so important in the Forex market?

What is the NFP?

What is the NFP

The US Non-Farm Payrolls (NFP) is a monthly report that measures how many new jobs were gained during the previous month, excluding farm related jobs.

It is typically released on the first Friday of each month and includes additional information such as the unemployment rate, average hourly earnings and participation rate.

The NFP release can cause hysteria in the markets and lead traders to impulsive actions.

It is therefore considered a main market-movement driver and is one of the most-watched monthly economic events.

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Trading through the NFP

There are two ways you can trade the NFP; before and after Release.

To trade the NFP before the Release, you need to speculate which way the market will move and open a buying or selling position accordingly.

Because of the inherent risk involved in this trading strategy, it is wise to use risk-minimising stops and other risk management tools and methods available.

When opening a position after the NFP Release, it is good to remember that while the NFP is a main market movement driver, it is not the only one.

Depending on the traded instrument, there are other market moving factors that need to be taken under advisement when deciding your stop and exit levels.

It has been well-observed and documented that after the release, the markets often mimic a V-shape pattern with a spike going in one direction and then reversing some minutes or hours afterwards.

Take the opportunity to learn how to trade the NFP before and after Release, with a free demo account here.

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