What are Nonfarm Payrolls (NFP)? How to analyze and trade effectively in Olymp Trade

What are Nonfarm Payrolls? How to analyze and trade better with NFP

If you are a Forex or Fixed Time Trade trader in Olymp Trade, you will be no stranger to the name Nonfarm Payrolls (NFP) that appears regularly on the first Friday night of the month.

Every time NFP is announced, it can make the forex market “dance” wildly in a short time. You can make profits of a month in just 1 day if you catch a good entry point at that time. Therefore, analyzing the Nonfarm news and trading with it is considered a good opportunity to increase huge profits for traders.

What is Nonfarm? How to read data and trade with Nonfarm news? Let’s find out in this article!

What are Nonfarm Payrolls (NFP)?

Nonfarm Payroll (NFP in short) is one of the most anticipated data of economic growth in the forex market. The NFP report shows the number of jobs created in the United States in the non-farm sector in the previous month. It reflects the level of activity as well as the “health” of the US economy.

As the name suggests, this economic indicator represents changes in US employment at any business, except:

  • Private
  • Agriculture
  • Public services
  • Volunteer
What are Nonfarm Payrolls (NFP)?
What are Nonfarm Payrolls (NFP)?

Why is NFP important in trading?

US employment is strongly correlated with domestic household spending and consumption. Depending on the number of jobs created each month, the consumption will vary. If jobs are created from month to month, the market will anticipate an increase in US household consumption, leading to an increase in GDP, thereby bringing a positive image of the US economy.

Why is Nonfarm important?
Why is Nonfarm important?

Many countries do business with the US and get a lot of profit from American customers. Therefore, the Nonfarm report also affects neighboring markets. Traders around the world also rely on it to increase their profits by speculating.

How to analyze Nonfarm report data

Before the release of most macroeconomic indicators, experts will collect data from economists, banks, investors… Then they will use those average forecasts to make Nonfarm forecasts.

How to analyze Nonfarm report data
How to analyze Nonfarm report data

All data about Nonfarm posted on Forex Factory includes:

  • Actual data (results from the latest release)
  • Market consensus data (this is the NFP forecast)
  • Previous data (results from the previous release)

There are three cases when news is announced as follows.

  • The data in the NFP report are in line with previously published Nonfarm projections. In this case, the market usually does not react strongly and continues the ongoing swings.
  • The data in the NFP report was lower than the forecast. This is a negative sign regarding the US economy. Usually, it will put pressure on the currency of this country because this result reflects a decline in the economy and employment.
  • The data in the NFP report was higher than the forecast. This is considered a positive sign for the US economy in general and the dollar in particular.

If the results are different from the predictions, the market will certainly have volatility.

Nonfarm trading strategy in Olymp Trade

NFP reports are often seen as the cause of volatility in the currency markets. This is also an extremely opportune time to open up potential trading opportunities. It can bring investors a big profit. However, there are many potential risks if traders do not know exactly what they are doing.

Analysis of some cases occurring in the EUR/USD currency pair when Nonfarm report is released

Analysis of some cases occurring in the EUR/USD currency pair when Nonfarm report is released

The first reaction from the results of the Nonfarm report was the price moving by a large margin. Most of the big hedge funds know about macroeconomic data in advance. With those advantages, they will execute trades following the market reaction. Therefore, if you want to be profitable, you need to analyze the situations in detail before the news is published and then come up with a specific trading plan that minimizes risk.

The second response depends on income status. If the market reacts positively, the US dollar will strengthen against the Euro. Conversely, the US dollar will depreciate against the euro.

The first reaction in the forex market usually occurs about 10 minutes after the news release. While the second reaction will start an hour later. In general, trading on the second reaction in the market is a lot easier to breathe than the first reaction. It’s due to that traders don’t need to rush into the second trade. They have time to analyze forecasts and indicators then decide on a position. To be safe, you should consider placing orders 30-60 minutes after the announcement of Nonfarm news.

To conclude

Nonfarm news analysis and trading give you the advantage of time as well as the potential for quick or long-term profits on Olymp Trade.

For the Forex day trader, it only takes one working hour a month to trade with Nonfarm and potentially make big profits. For Fixed Time Trade traders, this is also an opportunity to make a profit with some safe trading orders with larger amounts than regular orders.

Let’s try trading with Nonfarm news on the Demo account. After mastering, maybe it will help you earn huge profits every month. Happy trading and see you again in the next articles.

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What are Nonfarm Payrolls (NFP)? How to analyze and trade effectively in Olymp Trade
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