Those of us who are involved in Forex trading are familiar with Forex news or various events. These financial news are able to affect the market instantly. The most important and high-impact news among them is NFP (Non-Farm Payroll).
Every month, thousands of traders look at the market when this news is released, because it can create large price movements. Therefore, it is very important for a professional trader to have a clear understanding of NFP.
What is NFP (Non-Farm Payroll)?
NFP (Non-Farm Payroll) is an important economic indicator that shows how many new jobs were created or lost in the United States in a given month. In simple terms, it is a statement of whether the number of unemployed people increased or decreased.
- However, some sectors are not included here:
- Agriculture (Farm sector)
- Individual household workers
- Non-profit organizations
It mainly indicates the strength of the US labor market.
Who publishes the NFP and when is it published?
The NFP report is released by the U.S. Bureau of Labor Statistics (BLS), which is released on the first Friday of every month. This news is published through various websites.
Traders wait for this news, because the market is greatly influenced by this news.
Why was NFP created?
NFP is basically an indicator. Through which certain things are measured. For example:
- To measure the state of employment
- To understand the strength of the economy
- To help governments and central banks make decisions
- To control inflation
Employment directly affects:
- People’s income
- Consumer spending
- Economic growth
History of NFP
NFP is originally a part of the US Employment Report, which was developed in the 20th century. Over time, it has become an important economic indicator. It is used in central bank decisions. It has also become high-impact news for Forex traders.
Impact of NFP on the US economy:
If NFP is positive, then some changes will occur in the national economic structure, such as:
NFP (Positive Data)
- The economy strengthens
- Consumer spending increases
- Interest rates may increase
- USD strengthens
If NFP is negative, then some changes will also occur in the national structure, such as: NFP (Negative Data)
- The economy weakens
- Consumer spending decreases
- Interest rates may decrease
- USD weakens
Impact of NFP on the global economy
We know that the US dollar is the reserve currency. If the US dollar is affected by the impact of NFP, its impact affects the entire global economy. For example:
- Forex Market (EUR/USD, GBP/USD, USD/JPY)
- Gold (XAUUSD)
- Stock Market
- Cryptocurrency Market
High volatility occurs in the market during the NFP release.
The Importance of NFP for Traders
NFP is very important for a professional trader. Because this news creates a lot of big movements in the market. Big movements mean big and quick profit opportunities. The market trend is determined. This news is especially helpful for fundamental traders.
How can we trade NFP?
Trading in the retail market on this news is very risky. Because retail traders do not want to give the opportunity to trade instantly. Because the spread increases a lot for a short time when this news is published. As a result, most of the general traders lose when they take entries.
However, you can trade on NFP by following some simple formulas. For example:
You can get the opportunity to make some profit by setting Buy Stop / Sell Stop many times. In this case, if the broker’s technology is weak, you will definitely lose.
The market becomes normal 15/30 minutes after the news, but you can place an entry and make a profit because there is a lot of volume. This is quite normal trading, so its risk is also normal.
Many times, it can be determined whether the USD will be strong or weak by comparing Forecast vs Actual. In this, you can place an entry with little risk.
Risks of NFP trading
All the mentors and traders in the world agree on one thing, that NFP trading in the retail market is very risky. Due to this risk, small investments can be lost in an instant. On the other hand, if you have a large investment and place a trade with high risk, the loss can be much greater.
Now the question may arise why is trading in NFP risky? There are certain reasons for this, such as,
- High volatility
- Wide spreads
- Slippage
- Fake breakouts
- Potential for rapid losses
There are also some possibilities when trading NFP, such as:
- Opportunity to make quick profits
- Big market movements
- Clear trend formation
However, we must be careful because there is a high risk involved in trading NFP; it is quite difficult for new traders, psychology can be an issue, and market manipulation occurs.
Tips for trading NFP safely
- Always use Stop Loss
- Use low leverage
- Follow trading plan
- Don’t overtrade
- Understand the market before the news
NFP (Non-Farm Payroll) is one of the most important economic news in the Forex market. It not only indicates the state of the US economy, but also has a major impact on global financial markets.
As a trader, having the right knowledge about NFP will not only help you take advantage of good trading opportunities, but also protect yourself from major risks.