Nick is "inclined to reserve all judgements" and this leads others to feel comfortable confiding in him. Unlike Tom, Daisy, or Jordan, Nick is never quick to judge another character's actions. He is not vocal about the way others conduct their lives.
It is this quality that makes him a reliable narrator. He does not quickly come across as accusatory or condescending, so his observations are easily trusted. For Nick, there is no "bad" guy. For most of the novel, he lets people make their own choices and mistakes without trying to interfere. The only break in this habit is when he tries to get Gatsby to go away for awhile, after Myrtle is killed. He is doing this for Gatsby's own good, but he does not push him when Gatsby refuses.
Nick is cognizant of people's free will. He does not feel it is his right to pass judgement on another person's life or action.
“Inclined to reserve all judgements” (Fitzgerald 3), Nick Carraway is established as a reliable and objective narrator; his observations being neutral and non-judgemental of others.
Nick is an effective narrator because his character plays the role of an observer to the crazy world of the new, young rich in New York. He doesn't actively participate in all their scandals, so the reader can trust him to be objective when conveying characters. Because he's not judgemental of the characters, it leaves the reader to fully observe and understand them. Nick understands that no one is completely bad, and no one is completely good. Nick clearly values reason and rationality over passion or emotion, unlike other characters.