Nfp forex

It also addresses position size how big or small of a position you take as this is part of risk management.

How To Trade NFP As A Forex Trader

The non-farm payrolls report is one of the most-anticipated economic news reports in the forex market. It is published the first Friday of the month at 8: Bureau of Labor Statistics. The data release actually includes a number of statistics, and not just the NFP which is the change in the number employees in the country, not including farm, government, private and non-profit employees.

This makes it a great opportunity for day traders with a sound strategy to take advantage of the volatility. Below is a step-by-step forex strategy for trading the NFP report. There is little reason to day trade another pair during the NFP report. Close all prior day trading positions at least 10 minutes prior to 8: For this strategy we DO NOT take positions before the announcement, rather we do nothing until the NFP number are released. When that occurs the price will see a big rise or decline which typically lasts for a few minutes sometimes more.

During that initial move we do nothing, we just wait. EURUSD 1-Minute with Upside Move After NFP Report.

MT4 Just after 8: The bigger this initial move the better for day trading purposes. The initial move gives us the trade direction long or short for our first trade. If the price moves more than 30 pips higher, we will want to go long If the price drops more than 30 pips, in the few minutes after the 8: In figure 1 click for larger version the price moves aggressively higher in the few minutes after 8: That means we will be looking to buy when a trade setup occurs. The times on the chart are GMT, not ET.

LEARN FOREX - What is NFP

Where to Enter and Place Stop Loss with NFP Forex Strategy. MT4 The initial rise or fall in the moments after 8: The next step is to wait for a trade setup. Since there is often a lot of volatility surrounding the news, we will look at a few variation of the setup, as no two days are ever exactly alike. Unfortunately, it is quite general, so occasionally the pullback may not provide a trendline that is useful for signaling an entry.

In such cases, the alternative entry discussed in the next section may be helpful.

Figure 2 click for larger version show the strategy at work. The initial move was up, so we want a long trade. There is a pullback that lasts at least 5 bars, and trendline is drawn along the price bar highs that compose the pullback. The price then breaks above the trendline signaling a buy. A stop loss is placed one pip below the low of the pullback that just formed. Alternative Entry Method for NFP Forex Strategy. MT4 After the initial move, if the price pulls back more than half of the distance of the initial move before breaking the pullback trend line and signaling an entry then this alternative method can be used.

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Figure 3 click for larger image shows an example of this strategy. The price rallies so we are looking for a long trade. The price pulls back and consolidates, but then it drops instead of rallying above the consolidation. In this case, there is no trade, because the price does not move above the high of the high of consolidation. As long as the price stays above where the initial move began we can continue to look for long trades. In figure 3 the price doesn't stay above where the initial move began.

This sets up another alternative trade. If the price moves at least 15 pips past where the initial move began, we can look for a trade in this new direction, following a pullback. This big drop means we are now looking for short trades. The price target has also been included in figure 3.

How to establish the price target is discussed next. Establishing the Profit Target with NFP Forex Strategy. MT4 Because of the volatility surrounding the news announcement, how far the price moves from the 8: That said, the initial move is all we have to give us some idea of how volatile the EURUSD is in response to this NFP report.

Since we are waiting for a pullback before taking a trade, once that pullback starts to occur, measure the distance between the 8: This should be at least 30 pips or more. Now, cut that number in half. For example, if the price moved 43 pips in the initial move, cut that in half and you are left with That latter number is how many pips away you will place you target an offsetting order to exit the trade at a profit from your entry price.

Figure 4 click to see larger version shows one of the same trades we looked at prior. In this case, the size of the initial move is pips. Cut in half, our "profit target" is Figure 3 also shows an example of the profit target method. In that case, the initial move was 56 pips, so cut in half, you are placing a profit target 28 pips away from the entry.

Note that since trendlines are sloping the breakout price will change every bar.

The difference between your stop loss and entry is your 'trade risk' in pips. The difference between your profit target and entry point is your 'profit potential' in pips. Ideally, it should be 2x or more. In the examples above the profit potential is about 3x the trade risk.

Position size is also very important. If the trade risk is 20 pips, then your position size should be no larger than 2. It is impossible to describe how to trade every possible variation of the strategy that could occur. This why demo trading the strategy, before live trading, is encouraged. Understand the guidelines and why they are there, so if conditions are slightly different on a particular day you can adapt and won't be frozen with questions.

For example, above I stated that if the price initially moves more than 30 pips in one direction, but then reverses and moves 15 pips beyond the other side of the 8: That may be evident before the price moves 15 pips beyond the 8: Seeing the reversal is what matters, not the15 pips.

If the initial move was down, but the price stalls out and makes several attempts to move lower but can't, and then has a huge and sharp move to the upside, that is a reversal. The bias should be to take long trades Trade the strategy several times and understand the logic for the guidelines. That will make you much more adaptable, and you will be able to adapt the strategy to almost any condition that may develop while trading the aftermath of the NFP report. You may also find that under certain conditions the target price isn't realistic for the movement the market is seeing.

Depending on the entry price, the target may be way out of the realm of possibility, or it may be extremely conservative. Again, adapt to the conditions of the day. If the profit target seems way out of wack, use a 3: The goal is to place the target at a logical and reasonable location based on the trend and volatility.

The profit target method helps do that, but it is only a guideline and may need to be adjusted slightly based on the conditions of the day. Practice the strategy in a demo account until you are showing a profit cumulative after trading at least 5 NFP reports, only then should you consider trading this strategy with real capital.

If the initial move was down, we want to see the price rally off the low of the initial move and stay above low that for at least 5 bars. If the initial move was down, enter a short trade when the bid price moves below the trendline. That means the price moves sideways for at least two minutes.

Draw a line along the high and low prices of those two price bars once the second bar completes and the third bar is starting to form. If the initial move was down, enter a short trade if the bid price drops below the low of the consolidation.

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Trading The Non-Farm Payroll Report

Updated October 14, Before any trade occurs you know your entry price The method described above is a guideline. Get Daily Money Tips to Your Inbox Email Address Sign Up. There was an error. Please enter a valid email address. Personal Finance Money Hacks Your Career Small Business Investing About Us Advertise Terms of Use Privacy Policy Careers Contact.