The economic calendar covers all the major financial events and indicators affecting the foreign exchange market. And it is usually shown as a chart showing the upcoming period. It chronologically describes several events that move the market each day.
WHAT IS AN ECONOMIC CALENDAR?
- An economic calendar is a resource that allows traders to learn about important economic information to be released. Such events may include GDP, Consumer Price Index and Non-Farm Wage Report. In today’s fiscal mountains and in the environment of central bank intervention, it is very useful to know the date of the next central bank meeting or major news release.
- Events in the calendar are ranked low, medium, and high according to the level of market influence.
- The FX calendar contains information about the future and past economic events of different countries and can hint to the trader about the potential expansion of certain currency pairs.
- Every currency represents the economic, political and social stability of a country. In this relationship, changes in a country’s economic indicators will affect the value of the currency in question. Since every foreign exchange pair consists of two currencies. Each pair represents the balance of the market mood for the two countries that the respective currency pair represents.
Top Benefits of Using a Forex Economic Calendar
Among the top benefits of using the Forex Economic Calendar:
- Ability to manage risks effectively
- Being in a position to plan in advance
- Have access to additional, useful features for customization
Being able to plan your transactions based on economic calendar events. It means that you can be prepared for potential price fluctuations. When an event listed in the calendar occurs, it is an unstable period of time. It can be expected if data is released above, below, or in line with expectations.
Understand the principle of risk management in relation to these transactions. Risk means the difference between the entry price and stop-loss price. It is multiplied by the number of locations. Merchants must have this percentage of less than 2% of the account shares.
The Forex Economic Calendar allows you to plan ahead. For example, if an informal payroll report is mandated to be issued, traders will know that this index has the potential to move the FX market significantly. So being aware of the timings means that their foreign exchange transactions can be planned accordingly.
How to use an economic calendar?
Giving traders the opportunity to study and anticipate issues of interest. These are generally classified as economic indicators or monetary policy announcements.
An economic indicator is a statistical figure that transmits information about a particular economic activity. Traders use economic indicators to analyze the economic performance of a country and to predict future performance. For example, Quarterly U.S. GDP figures are an economic indicator that allows traders to review economic activity over the past three months. And compare it to previous years. U.S. economic growth or decline can have a significant impact on market behavior.
Monetary policy is the process by which central banks or other authorities control the money supply. One way to do this is to change interest rates. Central banks or financial authorities meet several times each year to review market conditions and formulate monetary policy accordingly. These important decisions will be announced after the scheduled meetings in the economic calendar.
How could we trade with the Economic Calendar in practically?
To determine how to trade news in Forex, you should consider the importance of news affecting your trading pairs. Also, you should compare the actual results with the expected market consensus.
It is very important to decide which position you are going to take based on the economic news to be published, so let’s look at the possible scenarios:
In this case, the seller will provide you with genuine articles as he does not want to tarnish his own image.
This approach is not recommended for internal trading (short-term) but can be used more confidently in swing trading (medium/long-term).
Access Buy / Sell
This approach underestimates the importance of the content of the release and simply captures the instability caused by a major event in the economic calendar. The seller orders above and below the current price to enter the market at the time of the news announcement.
Clean performance monitoring
In this case, the trade is based on factual announcements in order to take advantage of the news. And the price direction created by the new principles.
Once the immediate effect of the news is over, then you can resume the previous trend. Or you can start a new trend triggered by the new information.
Finally, there is another option that can be done. It is not just market trading around unexpected news. But it is also smart trading!
What Economic Events to Looks Out for
There most powerful events in an economic calendar. That includes interest rate decisions, non-farm payroll numbers and changes in the gross domestic product (GDP), consumer price index (CPI), and purchasing managers’ index (PMI). When using the calendar, traders should be aware of the volatile nature of these events that can cause them to move up and down. An economic calendar lists not only daily events but also the levels of instability associated with them.
Levels of instability
The level of volatility indicates the probability that an event will affect the market. The three-dimensional instability of the Iquiti economic calendar can be measured. An event with a low level of volatility is not expected to have a significant impact on the market. A moderate volatility event is expected to have a neutral impact on the market based on other factors. An event with high volatility is expected to have a significant impact on the market. These are often the events that most closely follow.
Traders should note that large and economically powerful countries generally have a large impact on the market. And therefore will not have the same impact as the economic indicators issued by smaller countries. The countries and economic zones that have the greatest impact on the market, in general, are the United States, the Eurozone, Japan, and the United Kingdom.
Equities Real-Time Economic Calendar covers financial events and indicators around the world. And it allows you to filter based on a number of parameters. It updates automatically when new data is released and is always updated with the latest developments. However, keep in mind that the calendar only provides general information and is not a trade guide.
Timing Trades when Using an FX Calendar
Trade activation time is important in economic news trading because it tends to respond quickly to a cash event. However, some data releases are likely to have a long-term impact.
Take for example the determination of interest rates in a country. Interest rates are used by central banks as a currency price and as an inflation regulator. No country wants to see its money too high (too expensive) or too low (cheap). Therefore, central banks can raise and lower interest rates in their countries to stimulate or curb growth and spending.
If interest rates are high, so will the cost of borrowing. This means that investors get less credit. This will usually reduce the country’s spending, inflation, and monetary value.
If interest rates are lower, loans will be cheaper and more attractive to people. This will generally increase the country’s spending, inflation, and monetary value. Therefore, interest rates have a long-term effect on currency pairs.
The market does not always follow the logic of economic policies. Market participants anticipate the expected announcements and therefore the movements that follow may be relatively calm if they do not meet previous expectations.
That is why it is so important to use the FX Economic Calendar.
If anyone who interested to study how to trade using the economic calendar or trade with news to improve your strategy. Then take your time and try it out with a demo account first. This allows you to monitor the impact of the economic calendar on online commerce. And help you learn how this data affects the price of money and other financial instruments.