5 Notes for Non-Farm Payrolls Trading
Posted on December 4, 2009 by Yohay
Filed Under Forex Basics | 32 Comments
The release of the American Non-Farm Payrolls is a circus in the forex market. Here are a 5 notes to watch out for in every Non-Farm Payrolls release during the financial crisis:
Note number 5 is the most important one – the knee jerk reaction.
Image credit: clementine gallot on Flickr.
- New traders – stay away: Trading during this volatile period is very risky. Take a break and enjoy the weekend.
- Action before the release: Strange moves begin in the markets well before the release at 13:30 GMT. This usually reflects the expectations – expectations which aren’t necessarily met, and they can lead to a counter reaction afterwards. Jittery trading intensifies with the release of the Canadian employment figures, an hour and a half before the American ones.
- Friday effect: Strong moves in a certain direction – either dollar strength or dollar weakness, can be seen hours after the release, usually in the last hour of the London session – between 16:00 to 17:00 GMT. This is the move that will determine the close of the week, and thus have a real long term effect. This is the full reaction.
- Technical barriers can be broken – support and resistance lines, uptrend support or downtrend resistance lines can be breached around the release of the NFP. This is usually only temporary – the graph returns to normal after a while, and these lines are respected again.
- Initial reaction is wrong: the initial reaction to the release is in the wrong direction: the knee jerk reaction is usually “normal”: good data yields dollar strength and bad data yields dollar weakness. This is very temporary! We are still in the global crisis, and the risk factor rules. So, minutes after the “normal” reaction, the risk factor kicks in and eventually the opposite happens: good data yields dollar weakness (risk appetite), while bad data yields dollar strength (risk aversion).
These are my tips. I’ll be happy to hear more.
Further reading: a report about last month’s terrible employment figures.
Enjoyed the post? You may want to subscribe by RSS feed or Email.Tags: forex trading,Friday effect,global crisis,Non-Farm Employment Change,Non-farm payrolls,resistance line,support line
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[...] naturally depends on the American Non-Farm Payrolls, which are due soon, at 13:30 GMT. Here are 5 notes for trading the Non-Farm Payrolls. Enjoyed the post? You may want to subscribe to the RSS feed. Trade together with Currensee [...]
thank you very much indeed
You’re most welcome yach.
Thanks for the tips. I think i will stay out from this news
Thanks for heads up for a newbee like me
This is a good education for forex traders
You didn’t make a good argument for people to stay out. The potential for gain out weights the potential for loss.
You have good points there. Forex is a risk in the first place. Trading the NFP with a good risk/reward ratio is indeed possible. Ever heard two pending orders?
[...] the big questions that will accompany us following the positively-shocking NFP. My 5 notes for the Non-Farm Payrolls are valid also for the next releases. Casey Stubbs analyzes this move and already sees an [...]
[...] 5 Notes for Non-Farm Payrolls trading [...]
”Cowards die many times before their DEATH”.”Look before you leap”.That’s my take on this,thanks for your warning but i shall trade NFP.
[...] Non-Farm Payrolls are predicted to show almost no job loss. The current consensus of economists shows a loss of 1000 jobs. If the number is a little bit better, and will show a rise in jobs, the dollar will leap. Job losses have been printed in the past two years and a gain in jobs will be excellent news. Here are some notes for Non-Farm Payrolls trading. [...]
I sure will be tradeing,
Thanks a lot.
The “Knee-Jerk” initial reaction that is almost always in the wrong direction can be best explained as the syndicates taking their position. If a bank puts in a shit-ton of money in either direction, it will temporarily drive price the wrong direction as supply and demand for the pair reacts to so many large positions being taken at once. Wait for all that to finish, then go in the same direction as the banks (usually the correct logical direction.) Meaning if the price shoots up after the announcement, I don’t go long. Instead I look for a new LOW after that and I go short. This trend usually continues into the next week. Look up Volume Spread Analysis. Hope this helps
Well nobody is clairvoyant so nobody knows what the real number is going to be. I do know that the “clairvoyants” expect a very good number, so that is alreay built into the price. You are always risking capital no matter when you trade, so the risking argument against trading NFP does not cut it with me. If the numbers are merely good or in line EURUSD will experience a rally or a relief rally, respectively. Dollar bulls would have to hit a home run to take this thing out of range. I am in long @ 14315, with a stop @ 1.4257. Risk vs Reward seems appropriate. I know is risky I am prepared to take the risk and lose.
Just my humble opinion
[...] reading: 5 Notes about Non-Farm Payrolls Trading. Enjoyed the post? You may want to subscribe to the RSS feed. Tags: ADP Non-Farm Employment [...]
[...] 5 Notes for Non-Farm Payrolls Trading – especially for new traders. [...]
[...] as the week proceeds. Remember to be very careful with trading this event. Check out my 5 notes for Non-Farm Payrolls trading. OK, let’s start the [...]
[...] time goes by this week, trading will be more and more influenced by the tension towards the Non-Farm Payrolls. I suggest being careful with this event. OK, let’s start the [...]
[...] As time goes by this week, trading will be more and more influenced by the tension towards the Non-Farm Payrolls. I suggest being careful with this [...]
Yes! I have learned my lesson. Never be caught in a trade during the NFP result. Best to watch the circus from the outside.
[...] Trading during this day, and especially around the release is different than normal days. The markets trade in high volatility. I recommend reading my 5 notes for Non-Farm Payrolls trading. [...]
[...] Non-Farm Payrolls are published on the first Friday of the month, as usual, but this time it’s Good Friday, a holiday in most countries. What will happen in the markets? And who will be there to trade? Apart from the regular events, financial leaders from the Group of 8 (G8) will be meeting in Gatineau, Canada and they might release some market moving statements. OK, let’s see the events: [...]
[...] newbies, and not only them, I recommend reading my 5 notes for Non-Farm Payrolls trading. This is always a very exciting, yet risky event. And this time, there’s an extra [...]
any tips like news trap..?
nice share.. thanks…
[...] Claims proved to be the best indicator for the all-important Non-Farm Payrolls release. The improvement during March – from 496K to around 440K was well reflected in the [...]
[...] for last, is expected to continue the trend of dollar strength. I recommend reading my notes for Non-Farm Payrolls trading – this event is the most volatile release and should be handled with care. OK, let’s [...]
[...] If you’re new to fores trading, note that this is very volatile and risky event. Please read my 5 notes for Non-Farm Payrolls trading. [...]
Thank for the notes, it reminds us to be careful not a coward.. a good trader must be brave to take a decision after thinking about it with one’s eyes open.
[...] volatile event in forex trading, and causes very high volatility. I suggest you read my 5 notes for Non-Farm Payrolls trading. The comment regarding the risk factor is very important these days. OK, let’s see [...]
THANK,S FOR YOUR INFORMATION MAY GOD BLESS ALL YOUR ENDVOUR .PLS NFP IS IT LONG OR SHORT.
[...] this is the most volatile event in forex trading. As I’ve written in the article 5 notes for Non-Farm Payrolls Trading, the initial reaction to the release at 12:30 GMT is not necessarily the direction that we’ll [...]