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 goal of the Nonfarm Payrolls strategy is to capture price momentum, it can be applied on absolutely any trading time frame.
Nonfarm Payrolls: Predictable Unpredictability
Nonfarm Payrolls is a key piece of news for all speculative traders, as it can show us how much the US economy, and consequently the dollar, has strengthened.
The thing 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 US non-farm sector.”.
The reason why this news is so important is that the non-agricultural sector of the economy, the lion's share of which falls to industry, is responsible for filling 80 percent of the country's GDP.
Thus, by monitoring employment, it is possible to predict the dollar exchange rate and draw conclusions about the country's changing economy.
Typically, when Nonfarm Payrolls are published, the market experiences the highest volatilityThe price can move 100-200 points in a very short period of time, but we're talking about the post-news effect.
The news itself is published every first Friday of the month, but interpreting it is far from straightforward. The fact is that unemployment statistics are released simultaneously with Nonfarm Payrolls.
Since the data can contradict each other, the market becomes virtually unpredictable, and only in rare cases, when the news moves in unison, does the price move in a more targeted direction.
However, despite the fact that it is almost impossible to predict the price behavior after the news is published, it is safe to say that it will cause a strong price impulse, which is captured by the strategy.
Nonfarm Payrolls Strategy Rules and Signals
To work with the Nonfarm Payrolls strategy, we will need an economic calendar, which will help you track news releases.
It's crucial to understand that data release delays are completely normal for a strategy, so it's crucial to track such changes promptly. Our economic calendar can help you with this http://time-forex.com/kalendar.
Once you know the news release date and time, you need to place two pending orders, Buy Stop and Sell Stop, a couple of minutes before the publication.
The pending orders themselves are placed at a distance of 25-30 points from the current price, which allows you to avoid the simultaneous triggering of two orders, 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 must be deleted as an unworked scenario.
You must place a stop either on the opposite order, or you can not place one at all, provided that you do not delete the second pending order, which will block your loss.
Profit is fixed with the help of trailing stop, which should be moved as long as possible following 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 items, causing price movements in all dollar-denominated currency pairs.
The described rules of the impulse strategy can be applied to absolutely any strong news that can move the market.
