How to Trade the NFP

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Video Transcription:

Hello traders, welcome to the news trading course and the third module news that move the market probably enough for us to trade. In this lesson, what we’re going to do is we’re going to the charts doing a non form payrolls announcement. What we’re going to go through this month’s MVPs and I’m going to show you what you would have had to do in order to profit from the move, vis-a-vis the number that was released.

NFP Economic Calendar

Okay, so first of all, we’re going to go to the economic calendar and we are going to look for this month’s non form payroll, and of course, you have to remember that non form payrolls are released the first Friday of every month, so we are going to go to May the 8, and as you can see we have the MVPs right here. Or the change in non form employment as they call it at Forex Factory. Now you can see that the previous number was 85 k, then we had a forecast of 228 k, this means we had a forecast of an increase of 228,000 jobs from last month. And the actual number came at 223,000 jobs created from last month. Now this is a huge improvement in employment numbers in the United States. You can see that . . . let’s go to the actual chart so you can see what has happened in the MV employment.

You can see that the employment numbers are kind of stagnated between 200 and 250, sometimes 300, but last month we had a drop, a massive drop in the non form employment, and this month we had a massive increase from 85 k to 223 k. This means this news was very positive for the United States which means that we have . . . we are going to trade the bullish side of the dollar which means that we are going to look to sell the U.S. dollar after the release was made. The release was made at 3:30 pm so we’re going to go to the charts on May 8, at 3:30 pm to see what happened. Remember that I have set my Forex Factory clock at the time of the clock on my MP4 platform server, so the actual release of the non form payrolls is around 7:30 am in the United States, but I’m going to look at 3:30 pm because of my server’s time.

Trading the NFP

Okay, so this is the Euro dollar one hour chart and basically what we’re going to do is we’re going to go to May 8th. When you’re looking for non form payrolls releases you just look for this page, okay, on the market where it becomes very volatile, as you can see, on the one hour chart it looks kind of untradable. The bullish side of the dollar means that we are going to look to sell the Euro-US dollar, so this is where we’re going to focus our trading. It’s around 3 o’clock on May 8 so we’re going to go back to the 30 minute chart and go back to our mark, then the 50 minute chart, the 5 minute chart, and then finally the 1 minute chart. When you’re trading the news we’re going to look for the smallest time frames to trade on.

How to trade the NFP

Now remember that we are going to look for levels on . . . well, for levels to put our targets on, okay, so we’re going to go back to the one-hour chart and we’re going to look for levels. Now, we have a level to the downside, remember before the non form payrolls, we don’t know if we’re going to look to buy the Euro-U.S. dollar or sell the Euro-U.S. dollar, okay. We have a notion that this month we are going to look to sell the Euro-U.S. dollar because it’s very likely we are going to see an increase in employment numbers, okay, because last month’s numbers were so weak that if we have even weaker numbers, that would mean that the U.S. economy is actually in recession, and that would be very bad, not only for the United States but for every single country that has or that the United States has an economic influence on.

So we are going to try to use these two levels on the one-hour chart to . . . as levels for targets on the lower time frames. Remember that this is a very volatile environment and we are trading inside of an 83, or we are putting our targets inside of an 82 to 83 pip range. So let me go back to the one-minute chart and let’s get this started. Okay, so this is what’s going on in the markets before the actual release. I think we have the release at 3:30 so the actual release is right here, okay, at 3:30 pm on my server’s time. Now you can see that we are never going to use the breakout strategy before the MVPs because if we had had used the breakout target we would have . . .I mean we would have made a profit but on the wrong side of the market, okay. And you can see that then the market just went down very sharply.

Now sometimes you are going to see a break above . . . let me just get rid of this color first . . . you are going to see in the very volatile environment a break of the range just to see them come back and take the stops before going up again, okay. But this is just what happens when the market is being controlled by big money. What we need to focus on is the actual release. You can see the spike in prices at 3:29 pm my server’s time and then you can see a very big spike up. You can see that we actually have three big spikes up, which means that we have a very large pool of buyers that came in after the break out and the retest of this area of these highs, that pushed price up to this area that we already had marked as a very important area of resistance. You can see that price came all the way up here and then we had a rejection for about 20 pips on a 55 pip candle, which is a lot, okay.

Then at the release we get a . . . let me just figure this out for you so you can better understand what I’m saying. We have a dodgy candle . . . let me move this also, you can see that we have a small buddy candle, a very large wick to the upside and that we also have a wick to the downside. We are not going to use the technical analysis on candles during MVPs because it is a very volatile environment, but just by the look of that candle you can see that we had rejection on this area, and everybody knows that an increase on employment is good for the economy. In this case the U.S. dollar, and of course if we have good U.S. dollar numbers, we are going to try to sell the Euro-U.S. dollar because of the negative correlation.

So how are we going to sell these non form payrolls? Well, you already have a level right here, okay, when this candle makes this high, it breaks with the area that we marked, and when this candle breaks, when the next candle breaks with this low, we are going to trade, to trade to the short side, okay. Now our stops are going to be all the way above these highs. And the reason all of our stops are going to be all the way above these highs is because, what this candle shows us, okay. Remember that we have a short . . . we have a signal to sell the Euro-U.S. dollar at 3:30 pm, okay. After the signal to sell, because of the number of the non form payrolls number, of course, after the signal to sell the Euro-U.S. dollar, you see that price comes down and then spikes back up. This is called stop hunting. I mean traders that went short with their stops too tight, got stopped out on a loss by stop hunters or like big money and smart money, so we’re always going to put our stops above the area.

So we have a 33 pip stop loss . . . let me just put a horizontal line right here . . . and let’s change it to a nice black color, so we know the difference . . . or dark blue is fine. We have the entry zone right here, so we have a 33 pip stop loss, and then we have our targets marked right here with this area because we want to get a feel we are going to put our targets a few pips above our area. Three to four pips is fine, in this case we are using six pips . . . yes six pips which is also fine. But this gives us a win or a profit of 70 pips in five, six, seven minutes. That’s 10 minutes per pip, and if you’re trading one full lot that’s 100 dollars per minute.

Now you can also see the risk to reward ratio right here is better than 221 and it’s very straight forward what you need to do. You need to wait for the initial thrust, then look for the rejection, and then look for the actual levels that our price need to break. Okay, sometimes we are going to wait for a corrective move, okay. And this is the corrective move that we are looking for okay. We went up to the upside pre..the news [SP] okay, and this is just the banks pushing price up from them to get a better price when they stop hunt you. Now you can see that the price went all the way up to the level that we marked, then we wait for the next level to break to the downside and we make a profit, and of course it also works to the upside if we have bad MVPs.


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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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