What is the purpose of an economic calendar?
An economic calendar lists key national and worldwide events that are anticipated to have a real-time influence on the price and popularity of global markets or assets. The calendar’s list of future economic events is anticipated to have an influence on financial markets such as stock CFD trading, currency trading, indices, commodities, and bonds.
Whatever time period you trade on or how active you are, it is critical to keep an eye on future events on a regular basis. Even if you are a long-term forex trader, it is in your best interest to keep up with key economic announcements, expectations, and ultimate results.
What are the most significant events in an economic calendar?
Each of the following announcements and news events is a major source of volatility, particularly in the FX markets. Non-farm payroll data (NFP), which is issued on the first Friday of every month and informs on the state of the US labor market, moves the market the most. Central bank interest rate decisions and the consumer price index are two other economic news items that have a substantial influence (CPI).
The following are the most important financial events that have a monthly influence on the markets:
- US Non-farm payrolls (NFP)
- Employment Indicators (labour force, payroll, and unemployment data estimate)
- Central Bank rate decisions (central banks minutes/statement)
- Consumer Price Index (CPI) or Inflation
- Retail Sales
- EIA Crude OIL Inventory
- OPEC Meetings
- Produce Price Index (PPI)
- Gross Domestic Product (GDP)
- New Home Sales
- Durable Goods Orders
- Existing Home Sales
- ISM Data
- Trade Balance
What is the best way to interpret an economic calendar?
Knowing how to interpret the Forex economic calendar effectively is critical to the success of your trading trip if you are trading in the currency market. To increase your chances of success in forex trading, keep an eye on the forex calendar for the most important releases and international events, and check it first thing in the morning.
By default, the economic calendar will display all forthcoming economic news and events from across the world. By selecting ‘Today, Tomorrow, This Week, Next Week,’ or the calendar icon to pick a custom date range, you may choose the timeframe you wish to review.
You can view the name of each event, as well as the date and time zone in which it is taking place, by scrolling around the calendar. For each event in the calendar table, the volatility, actual, consensus, and prior data are displayed, and when you select the event, you can view the actual & deviation, true range, and volatility ratio economic data charts.
Mastering the filter tool will save you time and allow you to locate vital data to aid you with your trades when you want to delve even deeper into a certain economic event, category, or even a group of nations.
The keyword search field may be used to search across global markets for a specific query, such as ‘inflation,’ which will highlight any nations with CPI-related events on the horizon.
You can pick up to 43 nations in the country area, and only economic events from those countries are displayed. Filter the results by whatever number of nations you want to investigate.
Choose from four distinct volatility settings using the volatility slide bar: no volatility expected, low volatility expected, moderate volatility predicted, and high volatility expected.
The category selection tool is the final feature you may utilize to improve the efficiency of your search within the economic calendar. You may filter down into the main economic events that will have an influence on the technical and fundamental research you’ve prepared for forthcoming trades by picking one or more of the 12 categories.
The 12 economic categories available include:
- Bond Auctions
- Capital Flows
- Central Banks
- Economic Activity
- Housing Market
- Interest Rates
- Labor Market
Economic indicators are divided into several categories.
When using an economic calendar, there are a few key signs that every investor should be aware of. The following are the two most important economic indicators to comprehend:
Leading indicators are any quantifiable or observable factors that look forward at future outcomes and occurrences in order to forecast movement or change. With a leading indicator, you’re attempting to foresee future business and economic trends, including their timing, length, and importance.
Lagging indicators are the polar opposite of leading indicators, in that instead of looking forward, they glance back to see if the desired objective was achieved. You can use a lagging indicator to confirm whether or not a long-term trend or shift in the economy has occurred. Lagging indicators are often simple to measure, identify, and compare against; nevertheless, one disadvantage is that they may reveal critical insights too late, leaving little time to act.
Use of an economic calendar has a number of advantages.
The economic calendar is a fantastic tool that has no drawbacks. Our free economic calendar may be used by traders of all skill levels to evaluate the indications of all significant events across all markets, including forex trading, commodities, indices, and more. The following are the key advantages of using an economic calendar:
Organizing future events
You can observe any events that might cause market volatility for those currencies if you are actively trading on a particular currency pair and monitor the economic calendar on a daily basis. The foreign exchange calendar, for example, would allow you to prepare ahead if NFP data or a US Federal Reserve press release were to be released soon.
The market’s macroeconomic picture is provided by the calendar. With certain significant elements influencing central banks’ choices, such as inflation and employment data, it’s helpful to be prepared for occurrences that might foreshadow interest rate hikes.
Management of risks
One of the most important aspects of trading that all investors should consider is risk management. Extremely turbulent market circumstances are a danger in and of itself, and the economic calendar provides a way to emphasize any future events that may generate such volatility. Knowing about these events will allow you to plan your trades accordingly without having to complicate your trading strategy any further.
Having a precise exit plan in place, such as scalping, might reduce the danger. This technique focuses on capturing tiny profits off small price movements in the case of high-impact news events that might cause massive market surges. So, if an impending incident causes a significant market movement, you’ve already profited along the road.
Knowing how the market works is essential.
Understanding how the global markets function is a significant benefit of the economic calendar for new investors. Without actively trading, a newcomer to the trading industry might keep an eye on the calendar and live charts to see what economic events are affecting various markets. Studying the movements will help you gain a better understanding of a possible market and educate you how to pick a good entry and exit point.
While trading forex, there are a few things to keep in mind
You now have a better understanding of what the economic calendar accomplishes and how to make the most of it. Begin by keeping an eye out for forthcoming news events and trading the currency market using these three strategies:
1. Intraday trading to profit from market volatility
Volatility excites intraday traders more than anything else.
Intraday trading may be a real chore if the markets aren’t moving.
The publication of key economic data is a bright spot for intraday traders. As it were, the golden road to pips.
Breakout levels are one of the most frequent techniques for intraday traders to trade large data releases.
It’s normal for markets to consolidate or ‘quieten down’ ahead of non-farm payroll data in expectation of a large move.
So, for both the long and short sides, you want to get all of your key levels set.
Let’s take a look at the Eurodollar around the 4th of January 2019 NFP report.
To begin, you need establish clarity on a key points, including:
What is the general consensus or expectation of Economic Calendar ? In January, it was predicted that 177,000 new employment will be created. However, it was produced at 312,000 copies.
What was the figure from the prior month, and what happened?
What was the pricing movement like last month, and did it go above or below expectations?
On a very basic level, you can see on the chart that we’ve drawn a support and resistance line leading up to the announcement.
It’s not uncommon for markets to react to the possibility of a figure printing higher or lower than expected.
The following steps you take will be determined by you and how you like to enter the market.
If you’re a rapid typer, you might want to manually enter your orders when the market approaches your critical levels.
Alternatively, you might place complete entry orders on both sides with appropriate take profit orders.
On a 5-minute chart for January 2019, here’s what happened during the NFP data announcement.
2. Swing trading in Economic Calendar, which involves riding the trend’s larger movements.
Swing trading is the second type of trading you may do when trading economic data releases.
Swing traders aim to profit from market swings by buying weakness and selling strength.
The Eurodollar has been on a downward trend since October 2018.
The market dropped downward after hitting the longer-term moving average on October 12th. It subsequently climbed until the 15th of October, when it struck a double top, was in a downtrend, and was overbought. Plus, non-purists can argue that there was a smidgeon of bearish divergence.
A swing trader would be concentrating on trading this short and searching for any exceptional strength to sell into at this point.
At current levels, an economic statement would give ideal selling circumstances (hindsight permitting in this example).
The EU Brexit Summit, Germany’s Economic Sentiment, Europe’s CPI statistics, and the ECB’s Praet speech all occurred on the day of the price rise. There are a lot of market-moving announcements there.
As the Eurodollar has been in a downtrend since late September, a swing trader may attempt to put limit orders knowing there could be a phony run higher and then sell the strength.
3. Breakout trading using momentum in Economic Calendar
Continuation patterns are incredibly popular among technical traders.
Ascending and descending triangles, wedges, pennants, double and triple tops and bottoms, and other chart patterns might help you identify the market you’re trading right now.
Assume a market is consolidating into an ascending triangle pattern ahead of a major economic announcement.
You might want to look over your key levels, sketch your breakout levels, and utilize the economic calendar to keep track of what others are expecting and saying about the approaching release.
Your inclination is for the continuance at this point, but as a technical trader, you’ll want to know when the next significant economic release is due and how the market will react if the news is favorable.
If it’s affirmative, you’ve established all of your parameters and are ready to fire.
If the news is unfavorable and the price decreases, you should consider the trade a failed long setup and move on to the next one.
So there you have it: three unique approaches to take advantage of the economic calendar and impending data releases.
Develop your entry and exit criteria, and constantly examine impending economic releases before making any transactions. It is critically significant.Economic Calendar
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