Why trading US Non Farm Payroll is so risky

Trading around the US Non Farm Payroll is one of the riskiest times to trade.
Why?

  1. Many professional traders with very large positions will close out before time of release.
  2. At the time of release the market has very low liquidity.
  3. Large spreads.
  4. Poor execution times.
  5. Gaps.
  6. Slippage.
  7. More than 1 important economic indicators released at the same time.
  8. Due to volatility on release large stop loss will be required.
  9. Timing of release is Friday afternoon USA and close to the end of trading for the week.

I would not recommend trading Non Farm Payroll. I believe it would be best to wait until after the event and see the new sentiment it creates for the USD then trade with that sentiment on a pullback early in the next week.

If anyone has any more reason please share.

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I think you would have to be suicidal to trade non farm payrolls on an intra day chart

But that is not enough to stop many from doing it!

So here is one piece of advice what I’ve observed over the years.

The first price after the announcement is always wrong - so if your intrepid enough fade that move!

Personally I would never close out end of day positions if the payrolls are out. Often it even works in my favour.

Also what I have done a number of times on a daily chart is - if the price takes out one side of the previous daily bar - I then place an order the other side.

It can work out really well - sometimes particularly if it’s indexes - the market takes out yesterday’s low and then rallies hard

I’ve even done it with gold.

Often after the payrolls we get new uplegs in one market or other.

However there are sometimes whipsaw losses - whichever way you look at it NFPs are not for the faint hearted

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You trade momentum during this time. This is the only thing you need to care. Also it is possible to trade pullbacks after the release because market calms down and trading conditions stabilise making it possible to make cheap entry/exits and scalp some moves.

You have to remember that some traders prefer those conditions and even thrive in them. Volatility can be your friend if you are experienced and can use it to your advantage. NFP doesn’t move the market like it use to so i wouldn’t be too concerned. John is right about trading NFP… you can sometimes see predictable trends. I used a 1, 2,3 strategy that worked about 80% of the time in my early forex days.

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Hmm, I never thought about it, but I never saw a problem with it, I think a lot depends on what kind of working conditions you choose. And of course from your experience, in general, any position can be risky and difficult…

What is so special about it?
This is ordinary news, which has a certain profit potential.
Problems may arise only if you have not dealt with it at all…

Thank you, very helpful for me

I think the wide spreads and the high levels of slippage are the killers. Plus the low liquidity does not help.

It’s been in wavy waters since the virus outbreak.

That’s when you’re trading on momentum. This is the only thing you have to take care of.

I would argue trading around FOMC interest rate decisions is equally as suicidal.

Thank you.

Agreed! It is a more volatile time to trade. You might find the following interesting to see how our analysts deciphered the strong components that affected the NPF that came out last week.

You trade momentum during this time. This is the only thing you need to care. Also it is possible to trade pullbacks after the release because market calms down and trading conditions stabilise making it possible to make cheap entry/exits and scalp some moves.

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Doesn’t payroll refer to wages?

US Employment statistics. There’s a preliminary report published by the ADP research institute and the final one by the US Bureau of Labor Statistics. They are responsible for big currency moves at the time of release. You can track their release and data with the babypips calendar.

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Not only to wages but employment gains too, according to current Fed stance (goal to achieve more inclusiveness in employment) it gained much more importance especially employment gains in minor groups like young blacks or hispanics.

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It is risky because trading non-farm presupposes the upsurge of volatility which is always risky. However, it also implies high potential profits.