In This Episode
- When the Non-Farm Payrolls (NFP) Report is effective
- Does it still work?
- The psychology behind tracking the NFP report
Does NFP Trading Work Anymore?
Walter has been doing monthly NFP webinars for years, and he shares his experiences with how the influence has changed over time, what he looks for and the biggest reason that he continues to do them.
This is an educational look at how the influence of economic reports change over time and the core concepts to look at when using these inputs in your trading.
Read the Transcript:
Hugh: Hi, Walter. You do a NFP reports podcast. I mean, not a podcast but a webinar every week?
Walter: Yeah, every month.
Hugh: Over the psychology behind that, how you’ve seen that maybe changed overtime. How psychology plays into trading that report?
Walter: I am not the only one that looks at the markets this way. I am sure you’ve done the same where we look for surprises. So for example, as we were recording this about a week or two weeks ago — somewhere between a week and two weeks ago — the Reserve Bank of New Zealand said they are going to try and clamp down on the housing bubble over there in New Zealand.
So the New Zealand Dollar just totally tank, that is the kind of same thing with these news trades. What you can do is you can get ready for a trade and then pray and hope that there is a surprise, that’s basically it.
You are right. Back in the day ten years ago, Non-Farm Payroll was kind of like the most important thing. Now, it is more about you know, is there an inflation? Or, who is the first reserve bank to start raising rates, that is kind of the big thing now.
Jobs are still obviously very important for the US Dollar on jobs reports for all currencies. Actually I remember when I first started trading, the jobs reports weren't as important as what Colin Powell would say. Because he was talking about whether or not they are going to go and invade Iraq for the second time back around 2001, 2002 you know in that area.
So you know it changes. The important thing is it changes. It used to be that the Non-Farm Payroll would pretty much set up the US Dollar for the whole month. It is not really the case anymore but you can still find surprises.
The reason why we do it I think is because it is fun to get traders together. I like to tell dad jokes at the webinar. That is kind of what we do in our down time because I find trading rooms to be absolutely boring. I’ve had friends that have done them and they’re trying to get me to do it with them. I just refused because I do not want to sit there for hours.
What we usually do there is to sit for about forty-five minutes to an hour and see if it sets up. You can do this with any sort of surprise. The Swiss National Bank had the surprise on January 15, 2015 with Francogeddon. The Swiss Franc totally appreciated so quickly.
They happen all the time. The flash crash. All these you know if you had a tsunami or something like that. These things will happen. They do not have to be economic news reports. But obviously, with the economic news report you have the advantage of actually knowing when it is going to happen so you can set it up. That is basically it.
Hugh: Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.
At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.
So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.
Hugh: Yeah, for sure. These things change over time like you said. One report might not be as effective or finding trade is another one and they can also do things like change how they calculate GDP.
Walter: Yeah, you are absolutely right. So the consumer price index has been changed in the US and I think they do not look at fuel and food now as part of your everyday cost.
Hugh: Because nobody is paying for that.
Walter: Yeah, no one has to go anywhere or if you need anything. Right now, if you talk to the people who are deep in the economics world like the hedge fund or stuff in the fundamentals, they are going to talk about bonds. Which is fascinating I think because what we are seeing in a lot of emerging markets like Brazil, you can even look at China and here in Australia, what’s happening is there are signs of inflation.
If it keeps going this way the reserve banks would have to do something and they’re probably going to have to raise rates. In Australia, they decided to spend four billion dollars on the bum markets trying to push it down. It is not working. It is four billion a day.
So it is really kind of a tricky thing. I believe that we’ve seen the bottom of the interest rates as in December 2020. I think they might be going up for the rest of our lives. It’s an interesting time actually. It will be interesting to see who blinks first. Which Central Banks start to rush it up right first.
I think that would make for some really good trends in currencies over the next two or three years. So if things go as I think they will, we are going to start to see Central Banks have to reckon with inflation which is showing up right now at the bottom market.
That’s all just fundamentals. It doesn’t matter. I could just still look at the charts and trade it. I do not like going into fundamentals. You kind of have to if you are trading the news like you said if you are doing these news reports.
Hugh: Sometimes you can get way too deep into it like getting into things that don’t matter, right?
Walter: Yeah, exactly.
Hugh: Same thing in the US. The rates cannot go any lower. If they raise rates then they’re going to be paying all these interest rates so it is going to be tough.
Walter: Yeah, it is a tricky thing. The Turtles never look at that. When they taught those guys how to trade, that was not part of the deal. They were just supposed to wait for the fifty-five day breakout. It is so funny.
You can watch tv all day. Literally every single person that comes on to that business channel, the NBC or the Bloomberg or the Sky News — they have Sky News in Europe and in England too — but it’s just like every single person that comes out kind of has a different opinion about what is going to happen. That is the whole fundamental world.
Whereas, it is great for technical traders. As technical traders we do not really have to. We can just say, “No. It actually made a new high. That is the highest price you’ve seen in the last twenty days.” There is no argument there. Do you know what I mean? That is what I like about technical.
Hugh: Yeah, the price cannot lie. If it is going to go up, it is going to go up. Cool. Thanks, Walter.
Walter: See you!
Hugh: All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.
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