Economic Calendar – FX Guide
An economic calendar is very useful in forex trading to know about any news or events coming up that can change their analysis fundamentally.
This article will talk about the Economic Calendar in-depth, give you tips on how to read an economic calendar in forex trading, plan everything ahead of time, manage risk, and support trading decisions strategically.
What exactly is an economic calendar?
An economic calendar implies the dates that are specifically scheduled or the events that might cause any effect on the movement of individual prices or to the whole market.
Traders and investors prefer using this calendar to plan their trades and reallocations of their portfolio accordingly and be alert about the chart patterns and some indicators they might be affected by due to these events.
An economic calendar is available for free for multiple countries on different market websites.
Understanding an economic calendar
Economic calendars are mostly focused on scheduled releases of some economic results for every specific country separately. Some examples of events that might be listed on this calendar may include jobless claims every week, new home reports, changes in the interest rate that have been scheduled already, signalling of interest rate, some regular reports from federal banks, economic surveys for some specific markets, and a lot of other kinds of events.
Most of these events listed come into one of these two categories reported on recent economic and financial events or projections of future economic and financial events.
Investors and Traders depend on this calendar to provide them with correct information and better opportunities for trading. Most of the time, these traders correspond the moving into or out of positions with either some announcement of any event or with some heavy trading volume that most of the times precede an announcement that has been scheduled already.
But looking up to this economic calendar can be really beneficial for traders who are willing to take a short position. If a trader guesses about the nature of the announcement correctly, they can immediately open up the position before any announcement that has been scheduled and close the position just within a few hours of the announcement.
How to read an economic calendar correctly
An Economic Calendar lays out the dates and implies the possible effect or the scheduled events nationally and internationally that might affect the popularity and price of given assets and the market.
As these certain events are known to impact trading in predictable ways, the date and nature of every event listed on an economic calendar can be used to increase the profit potential as an indicator for trading.
Events that keep recurring often make the most indicators as their effects on trading sentiment and volume are easily predictable. Some examples of it include scheduled publication dates for some famous market surveys or statistics and events like federal decisions on rates of interest, inflation, and trade balance.
Even though other global events can affect the market’s volatility, the economy and timeline of solitary events are unknown. They can be harder to trade because of that.
There are some free versions of these economic calendars that you can find online. Still, some trading platforms designed especially for that do charge something for account holders to access a better and more agile calendar.
Before choosing an economic calendar randomly, keep in mind that your chosen calendar will only be useful if you choose the correct or the most relevant market.
As forex trading works globally, it’s better to have an economic calendar that allows you to set customised criteria and filter your results by chosen currency and country.
Most of the economic calendars come with a short description about every event and give a rate for “actual,” “previous” and “forecasted.” The “forecasted” number is expressed as a currency value or sometimes as a percentage, and it represents the positive or negative market impact which the event might have.
This number also affects the sentiment and behaviour of trading, causing a news event. “Previous” means the change recorded in the calendar after the previous news event of this nature, and “actual,” tells the current price movement that has been following the event.
Your calendar also might give you some background details on every event and compare the market’s current performance with the forecasted rates.
Beyond giving this basic information, a more advanced version of the economic calendar will let you filter the results by the relevance to the markets you chose and help you evaluate the impact of every event on your chosen criteria.
The most important reason you should use an economic calendar is obvious. Being a forex trader, you know the effect of global economic news on your current portfolio and on the development of your new trading opportunities.
An economic calendar has all of this information organised and gives you the important context in tracking the events and knowing their potential effect on the forex market globally.
If you have access to a convenient economic calendar, you can check on the upcoming events and news while planning your trades and looking for possible moves in the market.
Economic calendars are used all over the world by traders who wanna think and plan ahead for their trading strategy.
But while this pre-planning is beneficial for your trading strategy, it is not essential to not overreact to upcoming events or on the revelation of some hot news reports. For example, events shown on your economic calendar can generally cause swift volatility with the forex market, but overreacting to this news can cause you huge losses if you go crazy with your forex trading.
Consider taking a balanced approach to evaluating the news while it is being developed and also stay attentive to the overall environment shaping the forex market.
When you try profiting quickly by impulsively trading on the reaction of other traders, it won’t take a lot of time for you to get burned by it.
Customising the view of your forex economic calendar
Customising the view of your forex economic calendar means refining your available information to the markets that are most useful for you. Some of the unique customisations you can make to an economic calendar include:
- Check out the past events, current events, and future events by choosing the filters like ‘Today’ ‘Yesterday,’ and ‘Next Seven Days’
- Edit the timezone to what you find the most comfortable by clicking the ‘Timezone’ button. Such as, US traders may choose Eastern Standard Time while Asian traders can choose their relevant time.
- Click on the ‘Country/Region’ button to choose the most relevant areas or currency that you want to analyse.
- Filter out the events for your level of importance through the ‘Importance’ tab.
An example of using the economic calendar
Let’s consider that you’re trading EUR to USD, and you want to know about the upcoming news of the Eurozone and the US for the coming week as it has high importance for you. So, here’s an easy step-by-step guide to getting the correct results.
- Choose the timeframe of ‘Next Seven Days’ from the options at the top.
- Now choose your required timezone by your choice from the timezone option below the timeframe option.
- Now click on the Country option and select your preferred Euro Area country from the ‘Euro Area’ tab. Then from the ‘America’ tab, choose the United States.
- Now from the ‘Importance’ tab, select ‘High.’
Now that you have selected the ‘Euro Area’ and ‘America’ buttons, you will only be seeing the news announcements of the Eurozone and US that have a high rate to move the market should surprise the economists, traders, and all the other market participants.
You can also just select every event of interest to get more information related to it, the news and analysis surrounding it, and add it to your email calendar, which you can add by choosing the ‘Add to Calendar’ button.
Navigating the economic calendar
You can find Economical Calendars for free on a lot of different economic and financial websites.
These calendars are different on every website. Such as, the economic calendar on a lot of websites only lists the events taking place in the United States as these events impact the market really well.
There are some other websites that let the user build their customised economic calendar by using your chosen filters to hide or show some required events.
But while these free calendars are really useful for beginners in trading, most tradera customise their own calendar based on the kinds of trades they prefer and the required regions and classes they choose to have.
Over that, a customised economic calendar does not have to be limited to the central bank or government releases. For example, as a trader, you may create an economic calendar focused on major releases from the most expensive regions while also including the United States.
Energy Information Administration weekly petroleum has reports and quarterly filing dates of some oil sector companies that he follows. So, in this way, an economic calendar can also become a customisable tool for trading, just like an indicator alert.
The key benefits of using a forex economic calendar
The key benefits of using a forex economic calendar are listed down below.
- You are now able to manage every task effectively.
- You are now able be in a position to plan your trading ahead of time.
- You have access to extra and better features that can be customised.
To manage and plan your trades around the best events on your calendar means you can prepare yourself for the potential turbulence that might happen in the prices.
When an event listed on the calendar comes close, there might be expected a time of volatility if the data is released well below, above, or even in line with your expectations.
Just understand and know the principles of risk management that are related to these trades. Risk is the difference between entry and stop-loss prices, which is then multiplied by the position size.
An economic calendar in forex lets you plan your trades ahead. For example, suppose a Non-farm Payroll report is expected to be released. In that case, traders will be aware that this indicator probably can move the forex market as indicated by the ‘high’ importance from the importance tab.
So, awareness of the timing of these events means that the traders can plan their forex trades.
Get benefits from features on the forex economic calendar
The forex economic calendars have this added benefit of special features like the customisation option mentioned above. It allows you to select your required timeframes, set your alerts, and apply required filters to get more specific news relevant to your chosen trading strategy.
Some websites also offer trading webinars so you can learn how to plan your trades around major releases.
An economic calendar has been a great invention as it is a resource that helps the traders know more about the important economic data which is scheduled to be released in the most important economies.
Such events can also include indicators like GDP, CPI (consumer price index), and the NFPs (Non-Farm. Payroll) report. Moreover, in the current environment of central bank intervention, it is really essential to know the exact date of the next central bank meeting or some other announcement of important news.
The events on the economic calendars are grouped according to the country and timezone by some websites. Then, the events are graded high, medium, or low importance, depending on their impact on the market. This is all about how an economic calendar works.
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Heinrich is a forex and CFD enthusiast with a passion for writing good informative quality content. He strives to showcase the best forex brokers in Africa. Join him on his Journey!
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