Trading the 200th Nonfarm Payrolls with Wayne McDonell - Interview

Wayne McDonell has been trading the currency markets in the public eye since 2005. In 2006, he started presenting our Nonfarm Payrolls coverage. We want to celebrate with you his 200th coverage in FXStreet with this exclusive interview.

1. You have been covering Non-Farm Payrolls for 16 and a half years, how do you feel about the trader you were when you started covering it?

When I watch videos of the original events, one thing stands out immediately is that very little has changed.  My charts and indicators are the same.  My strategy is the same.  I am proud to see the consistency in the methodology.  It means that what I share is based on the universal truths of trading.  

You can watch all 597 hours of the recordings and never see me pitch “a cool new trading system”.  There are proper ways to plan, execute and manage your trades and everything else is a gimmick.  

Many years have passed since the first “Trade NFP Live”.  I have matured as a trader and I have seen the market mature as well, but the universal truths of trading are still the same.  As a trader, I am thankful that I learned those lessons very early in my career.

2. How did hosting Nonfarm Payrolls shows come about?

We were planning a Special Educational Event.  I met with Franscesc, the founder of FXstreet, and two members of his team.  We all agreed that we wanted to do something completely new and something that focused on real-world trading advice, not a typical slide deck presentation.

We decided to broadcast my charts in real-time and provide live training as the markets were moving.  This was something very new and rarely seen before.  

We also agreed that NFP would be the perfect event, because it was an absolutely crazy news release: 300 pip moves were common and they were very exciting.

As a coach, I loved the idea of a live event because there were many gurus on the internet promoting NFP as a way to “get rich quick”.  So I agreed, but only if I could make it 3 hours long.  Why so long?  Well… if you were in the FXstreet webinar, you were not with the scammers.

That’s how “Trade Non-Farm Payrolls Live” was born.  200 months ago we decided to educate forex traders in the real market, during the craziest market conditions and do so for three hours straight.  I am happy to say, it was a huge success and I’ve loved every minute of it.

3. What do you like most about the NFP shows?

I love the mix of traders.  Some are very new.  Other have traded for years.  I take questions from them all.  It keeps me sharp.  

In one event I may explain different methods for scalping, then how forex traders interpret yields in the bond market, then the effects of monetary policy on dollar and then breaking down the reasons for the Central Bank of Israel for buying gold.  Its so much fun!

4. Are there any outstanding NFP shows that are unforgettable.

I do remember the NFP I hosted the day after I returned from a trip to India.  I was inflicted with “Delhi Belly”.  I was so sick that morning that I didn’t have the strength to even sit in my chair.  Instead, I laid flat on the floor and did the coaching from there.  I am very thankful that my wireless mouse worked from that distance and that I had a giant wall of screens!

I doubt it was my best NFP webinar, but it was the most memorable to me.

5. Do you have any anecdotes to highlight on your part or that of the participants?

Most attendees are serious traders.  They want to make trading their full-time source of income.  Some want to use trading as a income during retirement.  Others want to start a hedge fund.  

Whatever the case may be, the audience is demanding and forces me to always be at my best.  I respect them very much and I believe I’ve earned their respect as well.  I recognize almost everyone’s name in the chat room.  Many people have been attending the NFP event for 5, 10, even 15 years!  I wouldn’t be shocked if there are a few that have attended all 199 events.

6. Apart from the NFP, what other event do you find the most interesting to cover?

I am a fundamentally-based trend trader.  This means that I love technical analysis, but I have a passion for macroeconomics.  In fact I received my Macroeconomics Degree from Harvard in my mid-40s because I was excited about expanding my knowledge of how institutions make global investment decisions.  There was no limit to what I’d do to learn more about trading.

Fundamental analysis of macroeconomic data explains WHY the markets are moving.  As a forex trader, this is critical because I am always comparing growth, inflation, jobs, interest rates, institutional positioning, retail positioning and seasonality BETWEEN TWO COUNTRIES!  
I love geeking-out about the markets.  There is more to the flow of capital around the world than a moving average crossover or RSI divergence.  Its only after I’ve made a fundamental decision to buy or sell a currency that I open a chart and look for a trade.  I’ve felt that way for 20 years.

7. Are there any "under the hood" details in the NFP report that we should be paying more attention to?

Yes, but it changes depending on the market.  In the next NFP, we’ll look at the revised headline number, wage growth, hours work, and workforce participation.  We’ll need to put this in the context of the trend in weekly jobless claims, the employment subcomponent of ISM and the mass layoff numbers.  The headline number only creates volatility and I’m interested in the trend of all the other data.  The trend is your friend and volatility is your enemy.

8. Do you have a favorite leading indicator you use to assess the potential NFP outcome?

The only leading indicator is the FED Watch Tool for analysis of capital flows between banks in the FED Funds Futures Market.  It derives from the negotiated interest rates in smart money negotiations.  The data shown are simply based on the bond math between yield and price.  When you read, “There is a 78% chance of a 50 bps rate hike in December”, the FED Fund Futures Market is where they get that information.  However, I like to watch how it changes over time as an indicator of cash flow, not just the number on one particular day.

9. What does price action ahead of the NFP tell you about the market reaction to the data?

Money comes out of the market before NFP.  Institutional investors do not bet on the news or scalp the volatility after.  Remember that volatility is bad and is avoided by “big money”.  I call the Monday after NFP “Mutual Fund Monday” because I think Portfolio Managers have a strategy meeting after NFP and execute their resulting plan in the new week.  As a trader, I prefer to ride large capital flows when they put money back into the market.

10. With recent extreme volatility around CPI releases, do you think the impact of NFP has diminished?

I believe NFP is just as important as ever before.  It just measures a different component of the economy.  Inflation is now a bigger problem than Employment, so CPI and PCE are in focus.  But remember, the real attention needs to be on policy decisions by the FED, not news releases.  Many newer traders have probably witnessed good reactions to bad news or bad reactions to good news and they are left in bewilderment.  That is why I love a three-hour NFP event.  I can take the time to explain this complicated subject in simple term.  It is actually common sense if someone takes the time to explain it.  I can do that at NFP events.

11. How do you expect to see America's job market develop in 2023? 

People are likely to lose their jobs.  The first half of 2023 will be very challenging if January Earnings show that “Christmas Missed Us”.  However, I am an optimist in the long-run. Therefore, I think the economy will stabilize by the end of 2023.  

However, I think the days of fast growth are over.  I am preparing my retirement account for several years of a fairly slow-growing stock market; perhaps 5-8% growth per year.  Sadly, the Unicorns are dead.