Nonfarm Payrolls Strategy
Fundamental analysis, which is extremely popular among traders trading stocks and other securities on the stock exchange, has given in to well-founded criticism from traders in the foreign exchange market.
This is primarily due to the fact that the impact of financial reporting on the price of one individual share simply cannot be compared with the impact of certain news on the exchange rate of the national currency of an entire state.
Unfortunately, fundamental analysis in the Forex market turned out to be less effective, since the stability of the exchange rate depends largely not only on economic indicators, but on the competent policy of the central bank and political leadership.
However, for successful trading there is no need to be strictly tied to a specific scenario, since the very fact of the appearance of a price impulse at a certain time, as well as a sharply increased liquidity, can be an excellent opportunity to implement any impulse trading strategy.
Actually, in this article you will get acquainted with one of these impulse strategies, which allows you to make money on such news as Nonfarm Payrolls.
The Nonfarm Payrolls strategy is a momentum trading strategy based on fundamental analysis, namely on the basis of such a key macroeconomic indicator of the US economy as Nonfarm Payrolls.
It is also worth noting that since the main objective of the Nonfarm Payrolls strategy is to catch price impulses, it can be used on absolutely any trading time frame.
Nonfarm Payrolls. Predictable unpredictability
Nonfarm Payrolls is key news for all speculative traders, which can show us how much the economy of the United States of America, and as a result of the dollar, has strengthened or strengthened.
The fact is that Nonfarm Payrolls shows the number of people employed in the non-farm sector, and in our Russian economic calendar it looks like “Change in the number of people employed in the non-farm sector of the United States.”
The reason why the news is so important lies in the fact that the non-farm sector of the economy, of which industry accounts for the lion's share, is responsible for 80 percent of the country's GDP.
Thus, by tracking employment, you can predict the dollar exchange rate and draw conclusions about the changing economy of the country.
As a rule, when Nonfarm Payrolls are published, the market experiences a maximum volatility. The price can drop by 100-200 points and this is in a very short period of time, but speaking of the after-news effect.
The news itself is published every first Friday of the month, but its interpretation is not so simple. The fact is that at the time of Nonfarm Payrolls there is a simultaneous publication of unemployment statistics.
Since data can contradict each other, the market becomes almost unpredictable and only in rare cases, when the news goes in unison, the price has a more targeted movement.
However, despite the fact that it is almost impossible to predict price behavior after the publication of news, we can safely say that it will cause a strong price impulse, which is captured using the strategy.
Rules of the Nonfarm Payrolls strategy. Signals
To work on the Nonfarm Payrolls strategy, we will need an economic calendar, thanks to which you will track news publications.
It is very important to understand that postponing the release of data to a later time is quite normal for a strategy, so it is very important to track such changes in a timely manner. Our economic calendar can help you with this - http://time-forex.com/calendar.
After you have found out the news release date and time, you need to place two pending orders, namely Buy Stop and Sell Stop, a couple of minutes before the publication itself.
The pending orders themselves are placed at a distance of 25-30 points from the current price, which allows you to get rid of two orders being triggered simultaneously, which can occur due to a sharp increase in volatility.
After the price reacts with a price impulse and one of the two pending orders is triggered, the second one must be deleted as an unworked scenario.
The stop must be placed either at the opposite order, or you can not place it at all, provided that you do not remove the second postponement, which will block your loss.
Profit is recorded using trailing stop, which should be moved as long as possible after the price in order to squeeze out the maximum price momentum.
In conclusion, it is worth noting that Nonfarm Payrolls is one of the most highly volatile news that causes quotes to move for all currency pairs with the dollar.
The described rules of the impulse strategy can be applied to absolutely any strong news that can move the market.