As a forex trader, you must have come across the term NFP or Non-Farm Payroll. NFP is a monthly report that provides a snapshot of the US labor market, indicating the number of jobs added or lost in the previous month. This report is released by the US Bureau of Labor Statistics (BLS) on the first Friday of every month at 8:30 a.m. EST. It is one of the most important economic indicators that can move the markets significantly, especially the currency markets. In this article, we will discuss how to trade NFP using Forex Factory.
Forex Factory is an online platform that provides economic news, data releases, and trading strategies for forex traders. It is a popular site that has a calendar of economic events, including the release of the NFP report. Here are the steps on how to trade NFP using Forex Factory:
1. Check the Economic Calendar
The first step in trading NFP is to check the economic calendar on Forex Factory. The calendar provides the date and time of the NFP release, as well as the forecasted and actual values. It also shows the previous month’s data and the impact it had on the market. Traders should pay attention to the forecasted and actual values, as a significant deviation between the two can lead to market volatility.
2. Prepare for the NFP Release
Traders should prepare themselves before the NFP release by analyzing the market and their trading strategy. They should also set up their trading platform and charts, as the market can move quickly after the release. It is recommended to use a stop-loss order to limit potential losses in case the market moves against the trader.
3. Monitor the Market
Traders should monitor the market closely before and after the NFP release. They should pay attention to the price action and the volume of trades to determine the market sentiment. A bullish sentiment indicates that traders are optimistic about the economy, while a bearish sentiment indicates that traders are pessimistic.
4. Trade the News
Traders can trade the NFP news by taking a position in the market before or after the release. Before the release, traders can use technical analysis to determine the direction of the market. They can also use a straddle strategy, which involves placing a buy and sell order at the same time. This strategy allows traders to profit from a significant move in either direction.
After the release, traders can use the momentum of the market to enter a trade. If the actual value is better than the forecasted value, traders can go long on the currency pair. If the actual value is worse than the forecasted value, traders can go short on the currency pair.
5. Manage Risk
Trading NFP can be risky, as the market can move quickly and unpredictably. Traders should manage their risk by using a stop-loss order, setting a profit target, and avoiding over-leveraging. They should also be prepared to exit the market if the trade goes against them.
In conclusion, trading NFP using Forex Factory requires preparation, monitoring the market, and managing risk. Traders should use technical analysis and a straddle strategy before the release, and trade the momentum of the market after the release. By following these steps, traders can profit from the NFP news and minimize potential losses.
