Binary Options Non-Farm Payrolls (NFP) Trading Strategies
Binary Options Non-Farm Payrolls (NFP) Trading StrategiesApril 9, 2013
What is The NFP?
The non-farm payroll report is a monthly “bill of health” provided by the Bureau of Labor Statistics which provides a numerical snapshot with regards to a rise or decline in the amount of payrolls issued to around 80-85% of the US work force not employed in the farming industry and excluding government employees.
The report is used by the government as well as leading economists, and in turn Forex binary options traders to evaluate the economic state of affairs and of course derive insights while engaging in predictive modeling formulas.
Why do binary options traders wait for the first Friday of every month for the official release of the nonfarm payroll (NFP) data which is published by the Bureau of Labor Statistics? In short, the NFP has the ability to create a massive amount of volatility in the foreign currency exchange markets which in turn causes traders to place stop-market orders in order to hedge their trades and avoid a whip-saw scenario.
Generally speaking most traders will close out any positions they can in order to avoid the slippage, and this is a cyclical trading pattern that will repeat itself every month.
How Can I Leverage this to Make Money?
Technically speaking if you trade before the NFP report comes out you can pretty much bet you are entering the biggest crap shoot in the neighborhood. The way to leverage this information is simply by waiting and not executing any trades until the first trading session after the report has been made public subsides and the trading volume returns to normal.
The March 2013 report is scheduled for public release on April 5, 2013, at 8:30 A.M. EST. The February report indicated a positive growth rate and transition towards a strong and sustainable economy with employers that are hiring more personnel and paying out more salaries, this despite deepening concerns related to lack of momentum triggered by higher taxation and more cuts on government spending.
Additional Financial Indicators Important for Binary Options Traders:
The Feds Fund Rate (FDFD):
This is the interest rate at which banks or lending authorities (big insurance companies for example) lend money to each other. The higher the rate the less elastic the economy gets since there is less borrowing and funding of projects and initiatives taking place.
Jobless Claims Data:
This report documents seasonally adjusted claims based on unemployment data. The more claims the higher the unemployment is and in turn this leads to less money being spent by consumers. If you really want to make money trading binary options you need to wait for this report and take call or put positions based on the outcome and conclusions of this report.
How Does the NFP Report Influence Forex Trading?
Well, as mentioned previously the report acts as a type of barometer that measures one very important economic indicator, namely payrolls or salaries. The more the better and when the report shows less salaries than you have a possible indicator of a recession.
Some Trading Tips
1. Alternate between the 5 and 15 minutes charts when you run analytics before you enter positions after the NFP report has been made public. I would stay away from 60 second options during this time frame, they are already extremely high risk so there’s no need to add another element of uncertainty to the equation.
2. Change from candlesticks to bollinger bands in order to get a different perspective of the moving averages.
3. Wait for a few consistent formations to take place before starting to execute trades. The formations will flush out the traps and help you avoid a whipsaw scenario.
4. Use the inside bar as a point of reference and look for the hammers because when it drops that’s your entry signal.
5. Make sure to have stops in place and have a reversal strategy in place if you start losing trades.
To sum up, if you are trading EUR/USD Forex currency pairs with a binary options broker like Traderush and the non-farm payroll report is about to be made public, take a minute to stop and evaluate your exposure and open positions. The hours before and after the NFP data is announced are usually called “amateur hour” by the more experienced traders, however if you have your strategy down and understand how to decipher the entry signals correctly, you stand a good chance of making a significant amount of money trading binary options online.
Side note: When trading GBP/USD, EUR/GBP, USD/CAD, AUD/USD, GBP/JPY, EUR/JPY, NZD/USD, USD/RUB, EUR/RUB or EUR/CHF, make sure to differentiate between greenback or chunnels and fibers since local Non-US currency pairing will tend to be less influenced by this data.
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