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What's the diff b/t ADP NFP and NFP? 14 replies

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ADP predicts NFP?

  • #1
  • First Post: Aug 30, 2006 6:25am Aug 30, 2006 6:25am
well today ADP gets another chance to predict friday's NFP. not sure what kind of reaction we are going to get out of this one, as you probably know this indicator is only a few months old. we wait and see...
Relax and be happy.
  • #2
  • Aug 30, 2006 6:33am Aug 30, 2006 6:33am
er...excuse my ignorance but what's ADP if you don't mind me asking?
  • #3
  • Aug 30, 2006 6:34am Aug 30, 2006 6:34am
doh!

Estimates the number of new jobs created in the previous month. ADP, a leading provider of employment solutions for businesses, releases this indicator two days before the highly anticipated official Nonfarm Employment Change. ADP claims that this indicator has predictive value in regard to official statistics.
  • #4
  • Aug 30, 2006 6:51am Aug 30, 2006 6:51am
Since I haven't seen this yet, does anyone have a history of prior NFPs compared to ADP?
And I don't mean just the numbers but also the markets response in FX terms

Also, has there ever been a listing/thread which had the last 10-20 NFPs regarding size of move (in EURUSD or preferrably GBPUSD) and direction/amount of whiplash(last 3-4 NFP i saw were ALL unidirectional, but I keep reading that some can have heads for 30-50+ pips in the fake direction then crush you for over 100 pips on reversal...)?

I think that would be one very important and interesting statistic and set of charts to see indeed =)

Maybe if one would download the 1Minute history from Alpari and pick out the corresponding fridays? Not sure if Metatrader allows you to go back that far (last time I tried I couldn't get past 6 weeks or so on 1M or a small enough TF to see whiplash)...

Is there such thing? =)

One last thought: If ADP does indeed turn out to precede NFP and predict it properly, what about the old buy the rumour sell the news logic? Could we get a totally opposite reaction, similiar to consumer confidence? (antidollar news basically with worse sentiment but 100+ pip drop in cable after initial fake 30-40 up...)
Trust price. Know yourself.
  • #5
  • Aug 30, 2006 6:52am Aug 30, 2006 6:52am
yeah iso, ADP is the payroll service to many large businesses in the US so they get very timely data on employment changes. if thier number starts predicting NFP with some regularity, they will be the hotest thing on the block! not to mention taking some shine away from official NFP report.
Relax and be happy.
  • #6
  • Aug 30, 2006 7:04am Aug 30, 2006 7:04am
ADP has raised the ire of several fundamentalist last July when they publish a whooping 300K+ result (as against the consensus of about 130K). Several financial businesses bought the ADP figure, adjusted their position and was badly burned when the official result came in very USD bear.

Last August 2, ADP predicted a 68K+ number. The market reacted for a while and retreated back very fast.

If you are interested in knowing what the prediction to NFP - its not dependable. But you can fade this news though should it come in mildly (not as exagerated as it did last July 5.
  • #7
  • Edited 10:04am Aug 30, 2006 9:44am | Edited 10:04am
NFP is my bread and butter when it comes to trading news, although I am considering not trading news at all, just because I notice certain things mentally in myself that I don't like, so unless I can stop feeling this way, I'll probably quit trading it.

Regardless, if you're going to trade news, NFP is the cat's pajamas right now.

Note the underline and bold...

I've manually backtested it for months... it's about the only news event that reliably goes in one direction and one direction fast. Since I play very quick timeframes, I'm in and out by the time it reverses...

Now... if my broker starts whipsawing on 1 minute as soon as it comes out and try to take out stops, then that'll be when I quit trading it...
Mr. Trend
  • #8
  • Edited 9:46am Aug 30, 2006 9:45am | Edited 9:46am
Quoting BurgerKing
ADP has raised the ire of several fundamentalist last July when they publish a whooping 300K+ result (as against the consensus of about 130K). Several financial businesses bought the ADP figure, adjusted their position and was badly burned when the official result came in very USD bear.

Last August 2, ADP predicted a 68K+ number. The market reacted for a while and retreated back very fast.

If you are interested in knowing what the prediction to NFP - its not dependable. But you can fade this news though should it come in mildly (not as exagerated as it did last July 5.
I was totally cought off gaurd by that BS 300K figure they reported. I was in a very nice technical trade and paid no attention to that report because, while I knew who they were, I did not lend any weight to thier report. Needless to say I was stopped out. Then friday came and ADP's number was not even close to representing Non-Farm and the market to the ADP move back pretty much to the number.

The next months number was subsequently ignored by traders after that. It will probably be ignored for awhile unless over time it starts to show a consistent correllation of some kind.
Profit is where readiness meets Opportunity
  • #9
  • Aug 30, 2006 9:48am Aug 30, 2006 9:48am
so since ADP reported 107k, does that mean the REAL NFP will be 300k?
Relax and be happy.
  • #10
  • Aug 30, 2006 10:45am Aug 30, 2006 10:45am
I have already obtained a 2nd mortgage on the Farm, raised my leverage to 400:1 and placed 80% of my margin on a short gbpusd position in anticipation of just such an event.:

Actually i like to trade the NFP but it's like the wild, wild west. Lots of pain and euphoria dished out the 1st Friday of each month.
happy trading
ps-i am firmly against leverage higher than 50:1. I cannot handle it, at 10:1 i seem to be in control of my emotions...... any higher and my stomach aches when i trade.
  • #11
  • Aug 30, 2006 11:02am Aug 30, 2006 11:02am
Quoting squat1962
ps-i am firmly against leverage higher than 50:1. I cannot handle it, at 10:1 i seem to be in control of my emotions...... any higher and my stomach aches when i trade.
How can 100:1 leverage be any riskie than a 50:1?
1 Lot x 10 pips loss = $100 on a 500:1 leverage account
1 Lot x 10 pips loss = $100 on a 200:1 leverage account
1 Lot x 10 pips loss = $100 on a 100:1 leverage account
1 Lot x 10 pips loss = $100 on a 50:1 leverage account
All the above share the same $100 risk per lot regardless of leverage size.

Its only a matter of money management to choose how much lots to bet.
  • #12
  • Aug 30, 2006 11:12am Aug 30, 2006 11:12am
Quoting BurgerKing
How can 100:1 leverage be any riskie than a 50:1?
1 Lot x 10 pips loss = $100 on a 500:1 leverage account
1 Lot x 10 pips loss = $100 on a 200:1 leverage account
1 Lot x 10 pips loss = $100 on a 100:1 leverage account
1 Lot x 10 pips loss = $100 on a 50:1 leverage account
All the above share the same $100 risk per lot regardless of leverage size.

Its only a matter of money management to choose how much lots to bet.
I have wanted to say that sooooooooooooooooooooooooo many times.
Profit is where readiness meets Opportunity
  • #13
  • Aug 30, 2006 12:27pm Aug 30, 2006 12:27pm
I don't know if anyone has actually seen this, or not, but, here's a graph of the ADP report compared to the BLS report. It shows percentage change over the last month for each report.

What I find really interesting is that, with the exception of the last several months, the BLS report has had wider amplification than the ADP report. I thought this was an interesting graph.

If you look really closely, it appears that the ADP report is a 1 month leading indicator for the payrolls report in many instances.

stockwet
Attached Image
  • #14
  • Aug 30, 2006 1:48pm Aug 30, 2006 1:48pm
Quoting stockwet
I don't know if anyone has actually seen this, or not, but, here's a graph of the ADP report compared to the BLS report. It shows percentage change over the last month for each report.

What I find really interesting is that, with the exception of the last several months, the BLS report has had wider amplification than the ADP report. I thought this was an interesting graph.

If you look really closely, it appears that the ADP report is a 1 month leading indicator for the payrolls report in many instances.

stockwet
Excellent graph Stockwet. There is definately a correllation in direction. It is just the magnitude that is not so easy to correllate.
Profit is where readiness meets Opportunity
  • #15
  • Aug 30, 2006 2:23pm Aug 30, 2006 2:23pm
Quoting FXopportunist
Excellent graph Stockwet. There is definately a correllation in direction. It is just the magnitude that is not so easy to correllate.
Yep. The thing that jumped out at me with this are the spikes up that have occurred with the ADP data, but not the BLS data. It makes me think of the whole scenario we're in right now - EUR and GBP near highs, COTs report over extended a bit. There just seems to be a feeling of a bullish dollar. As I look at this, I think - gee, there could be a surprise jobs report to the upside which would be very dollar bullish. Taking everything together just makes it an interesting picture because you realize that if that doesn't happen, the EUR and GBP may be able to break through their recent highs.

It's fun how the market sets us up with often conflicting, but valid, scenarios so that we really don't know where it's going!
  • #16
  • Aug 30, 2006 2:42pm Aug 30, 2006 2:42pm
Quoting SeekingLight
...
Also, has there ever been a listing/thread which had the last 10-20 NFPs regarding size of move (in EURUSD or preferrably GBPUSD) and direction/amount of whiplash(last 3-4 NFP i saw were ALL unidirectional, but I keep reading that some can have heads for 30-50+ pips in the fake direction then crush you for over 100 pips on reversal...)?

I think that would be one very important and interesting statistic and set of charts to see indeed =)

...
I once, digged into the Forex Factory's NFP announcements for a few months (I think 8 months or more). GBPUSD usually moves over 100 pips and EURUSD over 70 pips. The chance of getting whipsawed is very high especially in those days that the price of USD should eventually rise (that means a drop in GBPUSD or EURUSD value).

I also need to mention that in most cases EURUSD gets back to its original price right before the news release. This may take a few minutes to a few days but in most cases it eventually gets back to where it was. The situation for GBPUSD is not the same and usually doesn't get back to where it was before the news and usually remains in the new price range. That's why I trade GBPUSD at the release of the news and then use EURUSD for any chances for reversal.

I do not recommend or even suggest trading news. Do it at your own discretion.
  • #17
  • Aug 30, 2006 3:03pm Aug 30, 2006 3:03pm
Quoting stockwet
Yep. The thing that jumped out at me with this are the spikes up that have occurred with the ADP data, but not the BLS data. It makes me think of the whole scenario we're in right now - EUR and GBP near highs, COTs report over extended a bit. There just seems to be a feeling of a bullish dollar. As I look at this, I think - gee, there could be a surprise jobs report to the upside which would be very dollar bullish. Taking everything together just makes it an interesting picture because you realize that if that doesn't happen, the EUR and GBP may be able to break through their recent highs.

It's fun how the market sets us up with often conflicting, but valid, scenarios so that we really don't know where it's going!
Ya know, I'm feeling the same way...I get this feeling like the market wants an excuse to bring the levels back down a bit...especially the GBP/USD...I just get the feeling that we're a bit oversold. Should the numbers come out slightly better than expected, I suspect that we'll see a nice retrace.

I want to say that there is pressure to keep the price action in "familiar" territory as opposed to letting the range break. I know the Yen has been weakening, but with oil coming back down, the USD/JPY isn't retracing enough to justify the price in GBP (at least that's my opinion). So, the only justification I can see is someone is saying the GBP should be strong (as opposed to the USD being weak). My feeling is that we'll get a decent pullback if the numbers are high (even marginally high).

Again...total opinion...

I'm sure we'll get a spike upwards if the numbers are weak, but just get the feeling that we want to come down just a bit. Perhaps it's just that magic 1.91 number, but I figured if we were breaking 1.90 we'd have had more momentum.
  • #18
  • Aug 30, 2006 3:33pm Aug 30, 2006 3:33pm
Quoting mrmikal
Ya know, I'm feeling the same way...I get this feeling like the market wants an excuse to bring the levels back down a bit...especially the GBP/USD...I just get the feeling that we're a bit oversold. Should the numbers come out slightly better than expected, I suspect that we'll see a nice retrace.

I want to say that there is pressure to keep the price action in "familiar" territory as opposed to letting the range break. I know the Yen has been weakening, but with oil coming back down, the USD/JPY isn't retracing enough to justify the price in GBP (at least that's my opinion). So, the only justification I can see is someone is saying the GBP should be strong (as opposed to the USD being weak). My feeling is that we'll get a decent pullback if the numbers are high (even marginally high).

Again...total opinion...

I'm sure we'll get a spike upwards if the numbers are weak, but just get the feeling that we want to come down just a bit. Perhaps it's just that magic 1.91 number, but I figured if we were breaking 1.90 we'd have had more momentum.
I have the same feeling but the charts say that we might encounter another spike in GBPUSD. We recently hit the record of Feb 04 of 1.9140. The highest high of Aug 2006 has been 1.9143 slightly higher than that record but it failed to clearly break it. On the other hand from December 2004 to April 2005 GBP has reached price ranges over current high. The highest high for GBPUSD since 1993 is 1.9548 and belongs to December 2004. Here are a list of highest highs comparing to current high.

Current (August 2006): 1.9215
Apr 2005: 1.9323
Mar 2005: 1.9260
Feb 2005: 1.9260
Jan 2005: 1.9180
Dec 2004: 1.9548
Feb 2004: 1.9140
(Source extracting data from the following chart: http://www.investoolsct.com/currency/free_charts.asp)

What do you think now? Which one is more probable? A retracement from Feb 04 record or a rally toward Dec 04 highest high ever.
  • #19
  • Aug 30, 2006 3:48pm Aug 30, 2006 3:48pm
Quoting FXopportunist
I have wanted to say that sooooooooooooooooooooooooo many times.
it's only a personal rule for me to stay disciplined on order placement.
But, if I interpret your and BK's statements correctly, you truly believe a trader is at the same risk with that much leverage? BK, you even used the term "bet" in your statement. 400:1 leverage gives you 40 times as much leverage to "bet" and 40x more a chance to put yourself in an overleveraged position.

I have self control problems I guess. But, it helps me create positions I can hold long term and not panic when i have a 20 pip move against me. I guess it's an inability for me to control my emotions at higher leverage levels.

I am curious, do the 400:1 leverage users in this forum ever find themselves replenishing their account? At 10:1, you have to screw up a LOT of times to lose all your money. At 400:1, you can lose 40x faster. Unless your are really disciplined..... like you guys.
  • #20
  • Aug 30, 2006 4:04pm Aug 30, 2006 4:04pm
Quoting squat1962
it's only a personal rule for me to stay disciplined on order placement.
But, if I interpret your and BK's statements correctly, you truly believe a trader is at the same risk with that much leverage? BK, you even used the term "bet" in your statement. 400:1 leverage gives you 40 times as much leverage to "bet" and 40x more a chance to put yourself in an overleveraged position.

I have self control problems I guess. But, it helps me create positions I can hold long term and not panic when i have a 20 pip move against me. I guess it's an inability for me to control my emotions at higher leverage levels.

I am curious, do the 400:1 leverage users in this forum ever find themselves replenishing their account? At 10:1, you have to screw up a LOT of times to lose all your money. At 400:1, you can lose 40x faster. Unless your are really disciplined..... like you guys.
Hello Squat1962,

If you have discipline problems, do what you have to do. But a Trader with discipling problems is a scary thought to me. It is like a alcoholic keeping just 1 six pack in the fridge.............. LOL
Profit is where readiness meets Opportunity
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