Forex News Trading - Non Farm Payroll

Fx News Article by Fast Economic News, 2011/02/24

Non Farm Payroll. To forex news spike traders they love the thrill of the fast moves, while other tend to shy away. Whatever side your on Non Farm Payroll (NFP) is the undisputed heavy weight champion of the economic news calender. It's moves can range from 20 pips to a 100 or more in only a few seconds.

The reason for this is the massive importance of this indicator. NFP is considered a leading indicator because an increase in jobs will likely be the first sign of an expanding economy, and a shrinking jobs number often means contraction. Simply put people with jobs tend to spend more money and consume more goods, while those who are unemployed tend to spend less money and consume less goods.

What exactly is Non Farm Payroll?

NFP is a measure of jobs lost or created in the previous month. Additionally there is usually a revision to the previous months number. Both can have a massive effect on the current rate of a currency. As the name "Non Farm" implies, this number specifically measures those jobs that are not farming or agriculturally based. By excluding those types of jobs gives a much more honest representation of the actual health of the jobs sector.

Its been said that jobs are the heart beat of the economy, and this illustrates the importance of this economic data. When job creation is on the rise consistently you can expect higher retail sales, GDP, CPI, and in the end interest rates. The trickle down effect is far reaching, but it starts with job growth which is why Non Farm Payroll is so important.

Non Farm Payrolls Impact On The Forex Market

As discussed in the opening paragraph NFP can produce massive moves in the forex market, as well as in equity markets world wide. These moves can last a few minutes, or they can change the trend direction of the market for weeks or longer. Being able to capitalize on these massive moves can make for massive profits.

One of the most profitable ways of trading Non Farm Payroll is spike trading. By getting in on the initial spike you can usually avoid the volatility associated with the price action that follows most NFP releases. Spike trading NFP will allow the opportunity for an entry near the pre-release price thus increasing your profit potential, and equally important reduce your risk.

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