One of the most anticipated economic events that traders look forward to every month is the release of the Non-Farm Payroll (NFP). The report is released by the Bureau of Labor Statistics that international governments and leading economists look to as an evaluation of the economic state of the U.S. It is estimated that the NFP comprises 80% of workers who produce the Gross Domestic Product (GDP) of the entire U.S.
What is it?
The Non-Farm Payroll is a statistical report on the current state of the U.S. labor market, focusing on the number of jobs that were added or lost over a period of the previous month. It represents the total number of paid employees of any business, highlighting the rise or decline in the amount of payrolls, in terms of their average weekly earnings and average work week, for that period.
The NFP does not include farm employees, workers from the government, privately-employed household employees and those that work for non-profit organizations who provide services to individuals.
The report is released on the first Friday of every month, where policy makers and economists assess current and future levels of economic activities in the U.S.
The Non-Farm Payroll and the Trading Scene
Traders mark their economic calendars as they anticipate this news event each month, especially on how the financial markets will react to its release. In the Forex market, the release of the NFP greatly affects the movement of the USD. Almost all of currency pairs associated with the USD experiences rapid increase in price movement. This is particularly true when the amount of data is over or below the expected figures.
Each month paints an entirely different scenario. The financial markets doesn’t always react how it should with the release of the NFP, although it has the power to cause a massive amount of volatility in the forex markets. When this happens, you may try to hedge your trades to recoup potential losses and avoid losing huge amounts during the course of the trading day.
Many binary options traders look into this report, with the NFP adding extra liquidity when statistics exceeds expectations and you may place a CALL option where the USD comes first in a currency pair. Or should be inclined to place a PUT option where the USD comes second.
How the Non-Farm Payroll May Work For You
The best way to trade binary options with the non-farm payroll report is to wait for its release before executing any trades. Wait until the first trading sessions commence, with trading volumes starting to normalize, after the report has been made public.
When there’s a large discrepancy in the expected NFP data and the actual figures, you may also close out any open positions to avoid a backlash of out-of-the-money trades. When you feel that the directional movement of asset prices is headed on the other side, favoring that position won’t hurt either. You can capitalize on a potential loss either by hedging or by placing a PUT option to leverage the trade.
Always assess the market situation prior to executing your trades with the non-farm payroll. When the NFP reports growth, expect to place the CALL options in the US dollar and US indices. When the NFP reports losses, consider placing the PUT option on your trades.
Compared with all standard releases, the Non-Farm Payroll is an important event for binary options traders. Take note that it measures payrolls or salaries. A good NFP report states a better state of economic affairs. A grim one, with lesser salaries, could be indicative of a recession.
To sum it up, the Non-Farm Payroll report is a key employment indicator that generates various trading opportunities. Now that you know how it influences the next major trend, we highly suggest that you utilize this indicator to trade binary options with a reliable and trusted brokerage like 24option.
*Trading Binary Options involves substantial risk and may lead to loss of all invested capital. Make sure that you are not trading money that you cannot afford to lose.