Non-Farm Payroll and Unemployment number are released on a monthly basis on the first Friday of the month. Today was the day we had the number released for the month of January. The Non Farm Employment number calculates the change in the number of people employed for the prior month, excluding those in the farming industry. The unemployment rate is the percentage of the total work force that is unemployed and actively seeking employment for the past month. These numbers are important for various reasons including the fact that the economy needs good job numbers to be growing strong. These employment numbers are considered a leading indicator in that if people are working they are buying. It is also important in the fact that it can move the market dramatically if these number come out different than the forecast.
Regardless of how these numbers come out you can see a movement in the overall markets. It does not matter if the number is above or below the forecast it can move things. As a trader we need to recognize the fact that a major release is happening and then look for the movements to occur in order to trade. We never want to trade on anticipation of something happening, only when it happens.
Let’s take a look at the charts of Gold and Silver to see what happened prior to and just after the release of these numbers. As of late Gold has been trading around the mid 1600 level and silver has been moving above and below the 32 level.
In this chart below you can see what was happening just before the release today. This sideways movements can be typical of the movements you will encounter just prior to major news announcements. When looking to trade prior to the announcement you can place stop orders to buy or sell as the price begins to move. You can see where we could have placed these two orders. There are several issues that can happen when trading close to the announcement. One is that if the spread widens you can get filled a poor price. Another is that the volatility can cause you to get in and stopped out quickly.
In a situation like this you can see where you would buy and where you would sell on a move up or down. If it moves above the buy stop you would enter a long position and if it moves below the sell stop you would enter a short position. Now take a look at the chart and what happened after the announcement was released.
It also had a big move up follow by a sharp move down. In either situation you need to make sure you your are controlling your risk.