NFP in Forex is, you first need to learn what NFP stands for. NFP is an abbreviation for Non-Farm Payroll, NFP which indicates the number of jobs gained in the USA during the previous month. It is published on the first Friday of each month and can trigger quite a market reaction. The NFP indicator consists of multiple measures, including the participation rate, unemployment rate, and average hourly earnings. Although this indicator is specific to the United States economy, it is widely recognized as among the major drivers of the market. The reason is very simple the US dollar is a very common currency that is traded globally as part of many forex currency exchange pairs. As a result, NFP is closely monitored by traders and brokers around the world, who use it to predict future market movements and to position their market trades accordingly.
Like in most other cases, it’s difficult to tell how much the market will react to the next NFP update. But there’s a way to get a general understanding of how it’s going to be carried out. This is focused on a collective expectation for NFP that is created by a group of professional analysts in the market. For situations where the results of the consensus are not very different from the actual data released, the currency market does not generally have a strong response, as anticipated. On the opposite, when the NFP takes an unexpected turn, the result can be shocking.
There are two ways to indicate Non-Farm Payroll trade:
- Trade is positioned before the release of the NFP. When a forex trader uses strategy and sets the position before the number is published, the main focus is on the capacity for deductive reasoning that will help to forecast the Forex Market behaviour. The key aspect of this approach is risk management, which will keep you from having major losses if your predictions are not made. Stop Loss Limitation is the best technique for managing your risk.
- Trading after the release of NFP. Even though this strategy is a little more realistic, it also involves a certain amount of risk. The key thing, in this case, is not to use the initial market response as a framework for the day. The best solution is to spread the positions and watch the market closely, as it has taken a rather dramatic turn multiple times during the previous releases of the NFP.