The Nonfarm Payroll News Trading Strategy is a currency news trading strategy you can use to trade the Nonfarm payroll data.

Many new traders don’t know what a non-farm payroll is. Here, we will give a brief rundown of what a nonfarm payroll is and give you a system to trade the nonfarm payroll.

What is the Non-Farm Payroll (NFP):

The Nonfarm Payroll or NFP is one of the biggest currency news that is released every month.

When is the non-farm payroll news released? The first Friday of Each Month.

All you need to know now is that the nonfarm payroll report shows the current state (how good or bad) of the US economy.

Timeframes: 5 Minutes chart.

Instrument: The NFP data is an indicator of American employment, so your currency pairs that include the US Dollar (EUR/USD, USD/JPY, GBP/USD, AUD/USD, and others) are most affected by the data release.

Why trade the non-farm payroll? 

There are those traders that don’t like trading news and there are those that like to trade currency news. For those that like to trade currency news, here are their main reasons:

• Trading the non-farm payroll news can be really profitable, the thing is, and you’ve got to get the direction right.
• You make profits in matters of seconds and minutes and they are huge profits. In a matter of a few minutes, the price can move from anything 40-200 pips. On ordinary days, you’d average 40-70 pips move in a day compared to the price movement due to the release of the non-farm payroll news.

The important thing here is to note here is this: if you get the direction right.

Some traders will not trade the Non-farm Payroll:

As always, what is exciting to some traders will not be so for others. So there are traders that will not trade the non-farm payroll and here are some of their reasons for not doing so:

• They think it’s gambling trying to guess which way the market is going to move when the news comes out.
• The tendency of price to whipsaw means that sometimes your trade direction may be right but you’d get stopped out prematurely when price whipsaws and hits your stop loss.
• Spread increase, which means your trading costs go up as time comes new to the non-farm payroll news release.
• Liquidity can dry up and sometimes, if you are in the wrong direction, stop loss jumping can happen. What this means is that even though you have a stop loss to protect your account, due to the fast-moving nature of the market when the news is released, your stop-loss won’t be hit and you can lose a significant amount of your account if this happens.

Calendar view:

Nonfarm payroll is an employment report released monthly, usually on the first Friday of every month.

How to trade the Nonfarm Payroll news:

With this Nonfarm Payroll news trading strategy, you really do not care which direction the currency market will go when the new is released.  Because what you are going to do are place two opposite pending orders on both sides to catch the price move in any direction it goes as soon as news is released.

The nonfarm payroll trading strategy is suitable in the situation where the market travels in a tight range before the news is released.

Trading Rules:

• 30 minutes before the nonfarm payroll news is due, open your chart in the 5-minute timeframe.
• Find the highest high and lowest low in this 5 min chart.
• Place 2 pending orders on both sides, a buy stop pending order at least 5-10 pips above the highest high and a sell stop pending order 5-10 pips below the lowest low in that range.
• Then place your stop loss on either side for each of the pending orders: your stop loss for a pending buy stop order will be the level at where you place your sell stop pending order and vice versa.
• Then wait for news to get released and it will activate one of the pending orders. Whatever pending order that is not activated has to close immediately.

Chart View:

Take Profit: 

• 2 time the range (example, if the distance between the high and low is 40 pips, then set your take profit level at 80pips).
• Or you can set your TP at 3 times the range.
• or another way is not to have a take profit target but to use a trailing stop and place it 10-20 pips behind the lower swing highs (for short entry trade) and ride out the price move until you get stopped out eventually. Do the exact opposite for a long (buy) trade.

Pros :

• As one of the most-anticipated economic news events of the month, currency pairs (especially those involving the US dollar) typically see big price movements in the minutes and hours after the data is released.
• This makes it a great opportunity for day traders with a sound strategy to take advantage of the volatility.

Cons :

• Price spikes or whipsaws, which can tend to activate both pending orders and then hit your stop loss (if they are placed too close) and you have two losses, almost at the same time.
• Lack of liquidity can also mean that sometimes your pending order may get filled at a very bad price.
• Increase of spread before and just a few minutes after the NFP news release.

Other important data releases to watch:

While the NFP generally moves the market, data like CPI, Fed funds rates, and GDP growth are important data releases too.

Use the Winstone Prime economic calendar to keep an eye on all the important economic data releases.