If you are interested in trading news releases, you should be aware of the Non Farm Payroll release (NFP). This is a payroll report of all US employees who are not farm workers, as farm workers are regarded as seasonal employees and therefore they are included in the report. Another name for the NFP is the unemployment report, and it is an accepted indicator which reveals how well the country is recovering economically, being regarded as a measure of the nation’s financial health.
Some traders make an error when they trade major news releases like the NFP, by not comparing the actual news to the news that was expected. Before the release of any major economic report, experts will always make projections, so when you decide the trade the NFP, you are actually trading the difference between the real figures and the projected ones.
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Is Directional Trading a Good Idea?
The decision whether or not to trade in a specific direction will depend upon the trader’s own individual trading method and on how well they know the market that is being traded. It is only actually important to predict whether the market will move significantly, and not the actual direction in which the market is going to move. Being able to take benefit from non-directional trading is also dependent upon the broker as double one touch trading will be required in order for a trade with no direction to be accepted.
The movement direction for a specific trade depends on several factors. These include the asset being traded and how it is connected to unemployment rates. It may even be possible to place a boundary trade. Frequently the report data will move the market, however if less movement can be expected based on the report, it is also possible to trade that prediction.
How to Trade the NFP
When trading the NFP, you should first set up a chart so that bars or candlesticks can be seen. The chart should be set to 15 minutes. You should open your trading platform and get ready to go, making sure that you are looking at the assets that you plan to trade. It is important to know the precise time at which the NFP will be released. You should not place a trade until after the first bar has formed following the release of the report as you will require the initial whipsaws to have been resolved in order to remove most of the risk of trading the report. You should wait for the formation of an inside bar. Its open and close must be entirely within the previous bar’s open and close as this usually shows a temporary consolidation and this usually leads to a breakout. When the bar closes either below or above the inside bar, this usually indicates that a trade will break out in the direction of the fresh close, although how far below or above will be something that has to be determined through testing. Once the inside bar has been broken, it is time to place a trade. The majority of the action will most likely be resolved within 4 hours, to NFP trading is perfect for binary options as the majority of brokers specialise in only offering day trades. You should select an expiry date within that four hour period. If you are able to perform a double one touch trade, you can select a trigger point to each side of the point at which you will enter a trade and then wait for a price break out to either direction. If this is not possible, you will need to monitor your screen in order to identify the direction in which the price will break in order to be ready to place your trade immediately based on which direction it breaks. You could possibly add indicators to your system in order to try to determine beforehand in which direction the price is likely to move.
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