Trading the non-farm report that is published monthly by the United States Department of Labor can be an extremely profitable investment strategy. This is course all dependent if you know how to implement the strategy properly to take advantage of the market. However, before you are able to start making money from the report, you will need to have a good understanding of what it is first.
What is the Report?
The non-farm report, or NFP, is an extremely important factor that investors, economists and many others use to gauge the health of the job market. Just as the name would indicate, it is a tally of all of those that are employed in the US, except for farm workers. Also, government employees, non-profit workers and those employed in a private household setting are not included. Basically, any company that is for-profit is included, such as goods-producing companies or manufacturing plants. The report is released monthly on the first Friday of the month at 8:30 am EST.
Many investors will try and profit off of the report by taking an educated guess as to how the report will come out. While there are many indicators available to investors to gauge the health of the job market, it is never a sure thing, as are most things in the investment world. While that strategy can sometimes result in a very large, seemingly safe “in the money” trade, it is extremely risky and one that most investors should steer clear of. There is however another way to take advantage of the NFP while still having the opportunity to cash in on a nice trade.
The release of the report pretty much guarantees that there will be a large amount trading activity that day, so you should not jump the gun before the report is released. Instead of speculating, you should wait until the report is released at 8:30 am. EST, and then see how the market is reacting to the news initially. The first few minutes gives the us time to look over the report and gather an opinion on what the market should be doing, and what it is actually doing. If the market is moving in the way same way that was thought, then it is probably a wise investment to get in on. However the key is to not jump the gun, we should be waiting for the proper pullback setup.
Here is a good way to profit after the market has started to move.
1. Bring up either the EUR/USD or GBP/USD currency for this strategy.
2. Wait for a few minutes after the initial volume spike to avoid any wild swings.
3. If you notice the pair is rising, and the employment numbers bad for the US. Wait for the pair to stop rising and turn around possibly one or two bars on the 1 minute chart (usually around a 50% retracement of the initial swing).
4. Once you notice that the bars have stopped dipping lower and have started to make higher highs, it’s time to get in for the next expiry. So if you’ve got 8 minutes left before 8:45 AM and you see this, you would try and take it for that expiry.
5. You may also consider taking this trade for EOD (End Of Day) as well which is 4:00 PM EST.
6. Remember this, the key is to make a profit for the day, so if you notice that things start looking poorly and you are still “in the money”, often it is wise to exercise your close early option to ensure your walking away with some profits instead of nothing.
Heres a GREAT video showing exactly this with Forex.
This strategy is a sound one to follow and often can result in a good amount of profit. However, as with all investment strategies, it is not 100% full-proof. Even though the market may trend one way initially, that doesn’t mean it will stay the course for the entire time target. This is why again, you should consider using the close early feature if it is allowed on your broker.