How to Trade on NFP Release?
The Nonfarm Payrolls (NFP) report is a crucial economic event that affects market movements. Typically, market movements are tracked after the release of the report. Here is what you can do to profit from the NFP report and prepare your trading activities for market moves in advance.
What instruments you can trade
Releasing the data as expected or worse, may cause a significant drop in the US dollar’s value. It is crucial that we prepare for all possible scenarios that may arise as a result:
GBPUSD and EURUSD may rise if the NFP data is lower than expected. XAUUSD (gold) is likely to go higher as a weak dollar is pushing gold higher. BTCUSD may rise if the NFP data is lower than expected.
Trading strategy for NFP*
The Headway analysts suggest using Moving Averages during the NFP release period:
- We place 3 Moving Averages on the chart with values 7, 20, and 50.
- Wait for the price to cross the three averages and settle above them.
- Wait for the occurrence of an under intersection between the averages in order, so MA7 first crosses MA50, then MA20 crosses MA50. The order becomes 7–20–50.
- When these conditions are met, we enter BUY.
- Place the selling target at the next resistance level.
- Place Stop-Loss below the lowest point the price recorded after the intersection.
- Exit the deal when the target is achieved or the price reaches Stop-Loss.
Tips for trading on NFP
When trading after a release, it’s important to exercise extra caution because breaking news and the event can have a significant impact on prices. Changes in direction or reversals can occur during the same day or in the following days. Our analysts share the key things you can do to prepare for the NFP release and the time after:
Be attentive to market movements. Monitor the market closely for any volatility or reaction ahead of the news.
Have an exit plan. Unexpected news can cause gaps in market prices, so be ready to close your position quickly if needed. Decide beforehand at what level you will close your position, whether based on profit targets or stop-losses.
Give your positions room to breathe. Don’t place tight stop losses right away. Give the market time to absorb the news before tightening your stops. This reduces the risk of being stopped prematurely.
Trade smaller position sizes. Consider taking only a partial position before the release and adding to it after the news if the market moves in your favor.
*This is not trading advice. Consider the risks involved in trading financial instruments with leverage.
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