How to Read and Trade an Economic Calendar
An economic calendar is a useful tool for traders to learn about upcoming economic events (news releases) that can affect their fundamental analysis. You will be explained an economic calendar in-depth, offering tips on how to read an economic calendar to plan and execute strategic trades, and manage risk.
What is an Economic Calendar
An economic calendar is an information resource that allows traders to study economic information scheduled to be released beforehand. Such events might include Gross Domestic Production (GDP), the consumer price index (CPI), and the Non-Farm Payrolls (NFP) report. In today’s environment of fiscal politics and central bank interventions, it can be very helpful to know the date of the next central bank meeting or major news announcement.
The events on the calendar are categorized from low, medium to high, depending on their likely market impact.
How to Read an Economic Calendar
Learning to read the forex economic calendar properly is important to enhance your trading skills prior to and following the most important releases. Checking the calendar every morning will allow you to prepare yourself with the upcoming events that matter the most according to your trading plan.
For removing the information overload, you are suggested to customize your economic calendar, as in default mode the calendar will show you every piece of economic news coming out for the major economies. With customizing you can clear your calendar and keep the most relevant data needed to work with your trades.
How and Why Should I Customize my Economic Calendar
In order to customize the economic calendar, you can look at events in the past, today and in the future by scrolling up to find past events or down to see any future events expected to come.
Once you select the ‘United States’ and ‘Europe’ buttons, you should only see Eurozone and US news announcements that have a high probability to move the markets you trade.
To learn more information about any economic event, click the ‘chevron’ button next to the name of the selected event in the calendar.
Benefits of Using an Economic Calendar
Benefits of using the economic calendar are:
• Being able to plan positions ahead to increase profitable trades
• Being able to manage risk effectively
• Being able to compare fundamental and technical analysis in trading
Planning Positions Ahead
The economic calendar allows you to plan ahead. For example, if a Gross Domestic Production (GDP) report is set to be released, traders will know that this indicator has the potential to move forex markets substantially, so awareness of the timings means they can plan their trades according to the news release
The ability to plan your trades ahead based on economic calendar events means you can prepare yourself for potential movements in price. When an event listed on the calendar occurs, there may be an expected period of volatility if data is released well above, below, or according to expectations.
Fundamental and Technical Analysis Comparison
Ability to compare your fundamental analysis based on economic calendar allow you to confirm or cancel your technical analysis based trade plans before entering into a trade, especially with lagging indicators, such as Bollinger bands and relative strength index for example.