The Non-Farm Payroll report also known as NFP measures the number of jobs added or lost in the US during the previous month, excluding farm working (hence non farm). It’s the biggest and most anticipated data drop and it happens every first Friday of the month.
It's important because it highlights the strength or weakness of the world's largest economy.
A weak number can show the economy is fragile or under pressure. A strong number could signal a growing or strong economy.
And for us that matters.
Volatility Factor
Retail traders in particular love NFP because it often triggers huge moves in price across the popular USD pairs, Indices like the S&P500 or NASDAQ and even the fan favourite gold.
But it’s imperative to know that spreads can widen, slippage can occur, and entries and stops may not be filled where you want.
This makes trading NFP a bit of a double edged sword. It can be an exciting opportunity, but also a nightmare to trade.
Trading NFP with a Prop Account: Pros and Cons
I am not here to tell you what to do with your money, and I will tell you my thoughts at the end, but let’s weigh up the pros and cons.
Pros:
Access to larger capital than your own can give traders an advantage to benefit more from the volatility.
Obviously being on the right side of it can lead to passing challenges quickly and efficiently.
Technically you’re not risking your own capital, apart from your entry fee.
Cons:
Many respectable prop forms don’t allow trading during high impact events like NFP due to slippage. You can often place a trade 5 minutes before or after the news. Breaking these rules can see you lose your account.
Being on the wrong side can damage not only your progress or balance, but also your mindset.
It's a roll of the dice. Now you can argue if trading is gambling or not but the fact is the NFP numbers can surprise the markets more often than not, and when it happens logic can go out of the window.
Friday’s NFP: What’s Expected?
This month’s forecast is for +75k jobs to be added to the US economy in August, which is well below what is considered to be good, which is usually 200k+. Traders will still have last month’s shock in mind too, where we saw June’s NFP number revised down to just 14k jobs created.
The Federal Reserve's chances of cutting rates in September shot up because of this and the USD remained weaker.
Will we see a repeat of this again?
A weak print of forecasts or below and we will likely see the USD weakness continue.
A strong print of 150k+ I think the USD turns positive on that.
My opinion
Let’s face it, trading is a zero sum game, there will always be a loser on the end of a winner. But this is also a long term game. Traders often forget it's not about what we do today, it's what we do over a month or 3 months or a year.
So in my opinion, I wouldn’t trade NFP directly with a prop account.
I would wait to see where price moved and how it moved, then think about the overall outlook for the market to make a decision. But trading it when the volatility is the highest, isn’t the smartest idea in my book.