The Highlight Of The Economic Calendar?

The Highlight Of The Economic Calendar?

There are certain events in the economic calendar that most forex traders will keep an eye on, regardless if they are technical traders, fundamental traders or a hybrid of both. One such event is the US labour department non-farm payroll. This report gives details on the number of jobs created outside of the farming sector (hence the name non-farm payroll), the rate of unemployment, productivity levels and average earnings among other figures. It is considered very current information because it is released just days after the end of the month.

Number of jobs created

Typically, the most looked at figure, the headline figure, is the number of jobs created. This is considered to be so important because the Federal Reserve has a dual mandate, which includes maximising employment, in addition to moderating long-term interest rates. Generally, a number over 200,000 new jobs created is seen as a very solid reading. This number of new non-farm jobs created would normally boost the value of the dollar. This is because more Americans working means there are more US citizens earning money and as a result there are more spending money. In other words, there is more money entering into the system which theoretically increases inflationary pressures, increasing the odds of the Federal Reserve hiking interest rates.

Average earnings

More recently traders and analysts alike have been paying more attention to the average earnings section of the report. This is because, despite the US economy booming, inflation in the US is remaining stubbornly low. Given that average wages are considered a direct indicator for future inflationary pressure, the market is watching intently for early signs of an uptick.

Inflation in the US has been sluggish since around March last year. Since then, and even more so over recent months, even if the number of non-farm jobs printed above 200,00, if the average earnings reading was less than impressive, traders have been selling out of the dollar.

The non-farm payroll is usually released on the first Friday of each month. Some traders like to trade the release because of the amount of volatility which often comes straight after. Other traders like to avoid trading the non-farm payrolls for exactly the same reason. Always check on the economic calendar to confirm that the release. Vantage FX provides their clients with a clear concise economic calendar on their website, so you should never find yourself in a position where you are unsure of the high impacting economic releases.

What to trade?

US dollar versus the Japanese Yen, USD/JPY, is the most popular currency pair to trade around the release of the non-farm payroll, it often displays big moves. Other dollar majors, such as EUR/USD and GBP/USD also often display big swings around the release.

If you are thinking about trading the non-farm payroll, it is definitely worth looking at data across the month to try to anticipate whether you think it will surprise to the upside or miss expectations. For example, consider the ADP private payrolls and manufacturing and service sector data for clues on labour force levels. Finally keep a close eye on your risk management.

A quick guide to day trading forex and scalping

A quick guide to day trading forex and scalping

Day traders are traders that use a set of strategies requiring them to open and close a trade or even multiple trades within the same day. This is HARD WORK, it often requires you to sit in front of your screen for extended periods of time through the session.

Is it for you?

In day trading, given that the time frame is so short, there is little room for error. This means it is more essential than ever that you stick to your trading plan and your trading rules. Mistakes on these shorter time frames can be costlier, especially because these errors could also happen very frequently, given the frequency of trading. This in itself can have a very damaging impact on your profits. So, it is worth thinking hard whether this is the route you want to go down. Do you have the time? Are your personality traits akin with this type of trading?

A day traders best friend – Volatility & Liquidity

Volatility refers to the size of market movements. It is impossible to make any gains from a sideways moving market. And less so when you are trying to make multiple gains in a day.

The need for high volatility suddenly means that the number of markets available for you to trade has decreased significantly. Also, be aware that each pair will also have varying volatility depending on the session. For example, GBP/USD will be quieter, with less liquidity during the Asian session, rather the London or New York Session.

Liquidity refers to the volume in the market. When there is good liquidity, the chances are you will get a precise fill. However, when liquidity is lower, fills aren’t always spot on the order price. For day traders, a slip on a fill can make the difference between a successful trading day or not.

Therefore, when choosing forex pairs to trade, chose volatile pairs with good liquidity and know when in the session you can expect to have more or less liquidity.

Scalping

Let’s take a brief look at one of the most popular day trading strategy, scalping

Scalping– this strategy looks to book profits on the smallest of prices changes. There is no time to do a proper analysis on each trade. Traders often scalp on a gut feeling that the trade will go up or down. Scalpers often trade many times in one minute, the idea being to make lots of little profits. High frequency trading is needed to balance out the small reward from each trade. And most importantly you must have a tight risk management system otherwise one loss can wipe out all the smaller profits.

Execution speed is essential for this strategy so its important that you think carefully about which forex broker you will use. Slow execution and you’ve missed your opportunity. Using a true ECN broker meaning that its pricing, spreads and execution are second to none. Whilst there are some brokers, which don’t like their clients scalping,look for a renowned forex broker, which encourages its clients to use the trading strategy which bests suits them, the client.