Forex Trading: How do Professional Forex Traders Trade the Non Farm Payroll data

by Joe Oliver, Forex Trading-Pips

How do professional forex traders trade the Non Farm Payroll data?

Non Farm Payroll (NFP) data is released to the market on the first Friday of every month and is notorious for generating market volatility and opportunities for short term traders.

Unless the data released is significantly above or below market expectations it normally pays to fade the initial reaction in the market. This is especially true when the move is counter to the underlying trend. (Market expectations can be viewed on the Forex Factory Calendar)

Price action pre NFP data release is typically contained within a narrow range as traders stand down / reduce position size, and await the data. Data which is slightly above or below market expectations normally results in a knee-jerk reaction move in the direction of the data release. Many amateur traders tend to chase this initial move which often results in late fills, bad slippage and ultimately trades stopped out for a loss. Professional traders normally wait for the initial reaction, then fade the move, gunning for other traders stop loss orders.

Take a look at the 15 minute chart of euro currency below. The yellow vertical line marks the point at which last Friday’s NFP data was released. The horizontal blue lines mark the trading range high and low immediately preceding the data. Friday’s initial reaction to the numbers sent the euro higher where it immediately ran into selling pressure at the BIG figure 1.3200 resistance level. Having tested and failed at the 1.3200 level, traders then sell the euro back down to take out intra-day stopsĀ  set just under the recent trading range low at 1.3080 (lower blue line). Once stops are taken out, the move is again faded back up with the euro eventually returning to exactly where it was before the NFP data was released.

Forex Trading euro 15 minute bars NFP

Forex Trading euro 15 minute bars NFP