NFP Forex Strategy: The Best Way to Earn Money While Trading

Welcome to a guide about a simple NFP Forex strategy that will revolutionize the way you see Forex trading. The NFP is around the corner again! This is always an exciting event, in my opinion, even though I never was (nor will be) a news event trader.

To me, the NFP event is something similar to a holiday feeling because of the anticipation of exciting times ahead.

Do you have the same?

Price almost always responds in a spectacular fashion to the release of the figures, and you can sense the drama in the air. Emotions are flying around as the currency pairs spike up and down. Some traders are winning a fortune. Others are losing their shirts.

This type of price movement is not for the faint-hearted and causes tremendous turmoil. In some cases, price resembles closely the movement of a roller coaster as it whirls down and up in a matter of minutes or even within a blink of an eye.

Yet, at the end of the day, the only thing which remains is a daily candle. All the emotions and movements still translate into a daily candle, just as the one before and after NFP. Here is another strategy called The PPG Forex Trading Strategy.

NFP surely is a separate type of trading in its own right, and this article will provide more guidance on how to trade NFP. Usually, Tony discusses NFP-related matters, but this time around, I wanted to share my two cents as well.

Before we do that, we are going to cover the basics of the NFP and discuss its importance for different types of traders. We will also discuss this month’s NFP figures and strategy and then explain a methodology on how to trade the actual NFP.

What Is Non-farm Payroll in Forex?

Just to cover the details: NFP is the non-farm employment change, and it calculates the total number of paid U.S. workers of any business but excludes government employees, private household employees, farm employees, and employees of non-profit organizations (to individuals).

It accounts for +/-80% of the workforce, produces the entire GDP of the U.S., and is a statistic researched, recorded, and reported by the U.S. Bureau of Labor Statistics and is released every first Friday of the month.

The unemployment rate indicates the percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

These two news events are the biggest and most volatile news releases in the Forex market. Nothing matches a day like today. The news events are vital for policymakers, economists, traders, business owners, investors, etc., to decipher the current state of the economy and predict future levels of economic activity.

If the NFP is expanding, this is an indication of economic growth. Economic growth leads to potential inflation, followed by an increase in interest rates to compensate for inflationary pressures, making the currency more attractive and competitive than other currencies.

However, if the NFP is contracting, this indicates an economic decrease and has the opposite effect compared to the above, which makes the currency less attractive (lower interest rates, quantitative easing).

How Does NFP Impact Forex Trading?

Our ultimate guide on how to trade NFP is continuing with a series of questions to help explain the factors affecting the Forex market during NFP.

Question 1: How Do We Interpret the NFP Figure Itself?

Traders and other stakeholders are comparing the actual NFP figure to the expected NFP figure.

1. If actual data comes in lower than economists’ estimates, USD weakness is expected / short USD.
2. If actual data comes in higher than economists’ estimates, USD strength is expected / long USD.

Question 2: What Currency Pairs to Trade?

Most often, the best currency pairs to trade an NFP release are the majors: EUR/USD, USD/JPY, or GBP/USD.

Question 3: Do We Want to Trade NFP?

It depends on what type of trader you are and how risk-averse you are.

The short and simple answer is that NFP is good for scalpers and long-term traders and not recommendable for intra-day traders picking one position a day (using 15-min-1 hour time frames).

Technical traders use technical analysis for the decision-making process. This trader often avoids trading on NFP days. Contrary to other news events, the impacts of the NFP are so heavy that typical trading comes to a halt. This is ok: remember that the goal of a trader is not to catch every single piece of price action.

That is why we have a trading plan for beginners that filters price action and allows us to focus on trade setups with positive expected returns. There are some differences depending on which time frames you use and what type of trader you are (know yourself):

• Intraday trader: Very difficult to trade due to quietness before the NFP release and volatility after it. Usually, stop levels are not safe.
• Swing trader: Difficult but doable. A trader using 4-hour or day charts can take long-term positions if a wide enough stop loss is used to survive the volatility and if a good major turning spot is identified. The NFP can be the beginning of a new direction and trend, so for swing traders, it can be important to be active and aware of that.
• Position trader: The chances of a trade occurring during the day are small. Most of the time, this trader is an end-of-day trader.

• Fundamental traders: The floor is yours/it’s your show.
• News event traders: The floor is yours/it’s your show.
• Scalpers: The floor is yours/it’s your show.

Question 4: Can Everyone Trade Everything During NFP?

No. It also depends on which type of movement during the NFP:

1st movement à institutions. Typically, the first reaction occurs so fast that it is only traded by institutional traders that have access to the fastest information and technology, as the reaction to the news is within a split second. Price can jump so fast that it changes within the blink of an eye.

2^nd movement à open to all. The currency has moved up / down and maybe even both for a few minutes. After the currency settles down and pauses for a few minutes, a trader can evaluate the NFP released figures versus expected, compare that to price movements and technical analysis, and judge whether the NFP trading strategy can make sense. Also, read a million USD Forex strategy.

August 2017 NFP

I am curious, especially this month, to find out the direction of the U.S. economy. The NFP news release is due at 8.30 am EST time on August 4.

1. Is the NFP figure and unemployment rate decreasing, increasing, or stable?
2. How will this affect the U.S. economy and the world economy?
3. How will it affect the FED’s accommodative policy?

There are tons of questions, as you can see. The NFP is a great measurement to provide answers to these questions. What do you think? Write us down below!!!

What is your NFP trading strategy plan? Leave a comment below!

A Simple NFP Forex Strategy Example

Now, we will discuss what an NFP strategy for the Forex market could look like. Please be aware that every trader must do their own demo testing, backtesting, paper testing, etc., before trading live. Past results do not guarantee similar outcomes in the future.

Advantages of Trading NFP:

1. NFP is very volatile
2. Provides the opportunity to exploit fake-outs
3. Quick in and out to grab pips

Disadvantages of Trading NFP:

1. NFP is very volatile
2. There could be spikes in both directions – never straddle the market
3. Due to emotions in this environment, key levels have less influence, and the market can overextend in a direction and then reverse
4. Stop-loss size can be larger and might not be respected (depending on the broker)

How to Trade NFP

Here is a method of how a Forex trader could trade the NFP:

1. The NFP figure causes the price to spike in a direction (up or down is irrelevant).
2. The price continues up or down for a minute or a couple of minutes and then pauses without breaking the new extreme (high or low).
3. Wait for a small pullback.
4. Conservative traders would enter the trade one pip above or below the new extreme (high or low).
5. Aggressive traders would trade the retracement.
6. Stop-loss one pip on the opposite fractal.
7. Exits:

• Target 1:1 r:r
• Next major resistance or support
• Time filter: trade should not take more than 20-30 minutes (20-30 bars of 1 minute)

Be careful, though. If there is not enough momentum or deviation in the NFP release, the market could quiet down after the initial reaction. In that case, there would be not much trading left to do.

The bigger the deviation between expected and released numbers, the higher the chance that the market will maintain its volatility – even after the first reaction, which is seen in the first minutes.

Conclusion – NFP Trading Strategy

Thank you for taking the time to read this article about the NFP Forex strategy.

We are confident that you will see the impact NFP has on Forex and implement the best strategies to trade against it.

Also, we hope you enjoyed this article on NFP Forex trading in the Forex market! As always, we wish you a good and safe trading today, and thank you for reading & sharing this article!

Please write down below what you expect of today’s NFP.

Please leave a comment below if you have any questions about what is non-farm payroll in Forex and the NFP Trading Strategy!

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