It is typically released on the first Friday of the new month, and also includes the Unemployment Rate, Average Hourly Earnings, and the Participation Rate. While all of those releases can have an impact, NFP is the main driver of market movement and is often times the single most-watched economic event that is released on a monthly basis.
Unlike men, not all economic news events are created equal. Some events create a lot of hysteria and knee-jerk reactions, whereas others barely cause a blip on the radar. So much attention is paid to the NFP report that pundits from across the financial blogosphere attempt to predict its eventuality and impact across a variety of financial instruments.
The large reaction is due in part to the Dual Mandate of the Federal Open Market Committee of maximum employment and stable prices. If job growth is strong, the Fed would typically look to raise interest rates assuming inflation is in check, and vice versa if job growth is weak. However, simply determining if NFP is weak or strong is another matter altogether due to expectations.
The consensus expectation for NFP plays a large role in how the markets react to the data, with the median expectation of a group of professional analysts serving as the decision point. For instance, if consensus is k, and the number comes out at k, there may not be too much reaction to that figure as it ended up being almost exactly what the market anticipated. The further away from the consensus, though, the more significant the reaction.
If you place a trade before the figure is revealed, you are using your skills of deductive reasoning to predict which way the market will go before it actually does. Risk management is vital to using this type of strategy as an unexpected figure can create gaps in the market that could theoretically jump right over any risk-minimizing stops you have in place. Therefore, it is wise to give whatever instrument you choose to trade wide breadth to move and oscillate to give yourself a better chance.
Trading after the release is a little more cautious, but also comes with its own set of risks. It has been well documented that markets can mimic a V-shape post NFP, where the spike goes in one direction then reverses in the minutes or hours afterward. A demo account is intended to familiarize you with the tools and features of our trading platforms and to facilitate the testing of trading strategies in a risk-free environment.
Results achieved on the demo account are hypothetical and no representation is made that any account will or is likely to achieve actual profits or losses similar to those achieved in the demo account. Conditions in the demo account cannot always reasonably reflect all of the market conditions that may affect pricing and execution in a live trading environment. Please let us know how you would like to proceed.
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