The financial markets are a news-driven supply and demand vehicle; therefore, the release of significant news or economic events will drive price movements in the market. Today’s forex markets respond instantaneously not only to news events as they occur, but also to forecasts of economic, political, and social events. Using a forex economic calendar can help businesses factor in the exchange rate impact of news when making their forex risk management and cash flow decisions. The economic calendar is useful as the forex markets tend to move on the release of economic data, and forex traders will, therefore, implement strategies to try to make money on the rise in market volatility. While these free calendars can be a useful starting point, most traders customize a calendar of their own based on the types of trades they prefer and the asset classes and regions they are comfortable with. Moreover, a customized economic calendar doesn’t need to be limited to government and central bank releases. A trader may, for example, create an economic calendar around the major releases from oil producing regions while also incorporating the U.S.

How to Use an Economic Calendar

However, it appears that the Chinese GDP was printed at 6.8%, which is 0.1% higher than the reported expectations. Economic indicators are usually released by governments, international organizations and private research firms. Its prosperous growth in recent years has allowed Australia’s economy to become one of the strongest in the world, being the sixth country in the world in the quality-of-life index. The Australian economy is particularly rich in commodities, with the Down Under country mainly sourcing its resources to China and other Asian countries. Of special interest are the Federal Reserve decisions, usually announced by Governor Jerome Powell.

Is It A Good Idea To Trade During The News Release?

This can be done with a price chart like those available on the FlowBank trading platform. GBP/USD would be affected by GBP announcements and EUR/USD affected by EUR announcements etc – and all will be affected by USD announcements such as US GDP data. Bearing in mind the Forex Factory calendar is free to use so there can sometimes be a lag. A Bloomberg Terminal would almost certainly deliver the news quicker, but it costs thousands of dollars per month, something most retail traders cannot afford. If there is a lag, use an alternative news source as a backup option or if the currency price has already moved, then skip the trade. You should start the market analysis long before the news is published.

How to Use an Economic Calendar

But China is the world’s biggest manufacturer, and demand from China for products, starting with Oil and ending with commodities and with everything you can imagine. That demand influences other major currencies that we can trade. Today’s release was supposed to come in at 0.1% This is the old data (he highlights ‘-0.1%) this is the expectations (he highlights 0.1%) and this represents the “actual data”. If the “actual” is greater than the “forecast”, this is good for the currency. What does it mean by the ‘actual being better than the forecast’? If leading indicators are showing signs of an economic contraction, then an investor may want to reallocate their portfolio towards more low-risk, fixed-income securities.

Economic Indicator News

Тhere is an excess of Oil in the US, and the Oil prices are likely to drop due to oversupply. Since a sizable part of the US GDP depends on Oil production, a decrease in Oil prices is likely to cause a decrease in the US Dollar exchange rate.

5 effective ways to fight revenge trading 14 May 2021 Revenge trading is an emotional response after traders suffer a significant loss. Understand how to overcome revenge trading with 5 ways to fight it. So, a swing trader might look to set limit orders knowing there could be a fake run higher and then trading strategy sell the strength, as the Eurodollar had been in a downtrend since late September. At this stage, a swing trader would be focused on trading this short and looking for any unusual strength to sell into. Swing traders look to trade the swings, and their motto would be to buy weakness and sell strength.

Examine the current market trend, strength, and direction, and evaluate support and resistance levels leading up to the news event and immediately following it. If a news event is anticipated to reveal positive market insight, you may see a steep surge in price action prior to the news release and witness a precipitous dip if the news defies popular expectations. To capitalize on news events, start by choosing a major currency pair that’s likely to be influenced by a major news event. For example, when using the NFP report as an indicator, you should seek out a major USD currency pair because NFP is a measure of U.S. markets. In the United States, the central bank refers to the Federal Reserve, aka the Fed. This U.S. report tracks employment rates for the majority of the U.S. labor force (omitting farmers, self-employed individuals, nonprofits, federal intelligence, and military factions). The reports are released by the Bureau of Labor Statistics on the first Friday of each month and detail stats from the previous month.

How To Use Economic Calendar To Increase Profitability

Your stop loss order should be placed on the other side of your entry point, preferably beyond a recent swing. However, you should try to keep your stop a bit loose, since high volatility is expected at the time of the release and shortly thereafter. If the stop is tight, then there is a high likelihood that the price hits your stop loss from the whipsawing price action. If interest rates are low, then loans will be cheaper and more attractive to people. This will typically increase spending, inflation, and currency value in the country. Therefore, interest rates have a long-term impact on currency pairs. The opposite applies if the release is worse than the expectations.

How to Use an Economic Calendar

Investors should also note that large, economically powerful countries usually have the biggest impact on the markets. In this case, an economic indicator released by a smaller country may not have the same impact as one released by a bigger country. For example, the consumer price index of Greece is unlikely to impact the trader markets, and some calendars will have it listed as a level one event. By contrast, consumer price index data from the United States or Eurozone will have the biggest impact on the markets. Countries and economic regions that tend to impact the markets the most are the United States, Eurozone, Japan and the United Kingdom.

The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you How to Use an Economic Calendar have any doubts. An economic calendar provides traders and investors with forthcoming major economic releases that could affect the capital markets. The information listed in the economic calendar comes from government and non-governmental entities and consists of mostly macroeconomic numbers such as GDP.

What was supposed to be only a 1% risk trade could end up resulting in a 5% loss, for example. Each event is graded, and those grades depend on which economic calendar website you use. Minor events that are expected to have a minimal market impact are either marked as “Low” (as in, “low impact”) or they may lack any special markings. Events that may have a market impact are marked as “Medium,” and they usually have a yellow dot or yellow star beside the event.

(10.07) To sum up, you will find out more details on the article that comes with this video. I wanted to better explain how to read the economic calendar and why the Red news is the one that matters. (2.38) And so it gives traders an educated guess about the state of their economy. We also have German retail sales that will affect the Euro or the nationwide HPI, and this will affect the GBP and so on. If you do not know what the economic news means or how to interpret it, this is not a problem; you do not need to have a PhD in Economics or anything else. Additionally, you will be able to find the average analyst forecast which is measured against the actual release. Once this becomes available an exchange rate will begin to move if the forecast is different from the actual release.

The economic calendar covers close to 4000 macroeconomic events, also incorporating central bank meetings and important speeches, to offer a complete picture of the world’s important economic announcements. These include the closely-watched US non-farm payrolls release, CPI and PPI data, plus manufacturing figures from major economies including the US, UK, eurozone, China and Japan. You can also obtain at-a-glance information Currencies forex on major announcements for economies such as India and New Zealand. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Gold Is Still Range Bound, But Market Sentiment Shifting To Bullish

I research, test and trade with the latest and best brokers, signal providers and trading tools to help you find out what works best. ⦁ You can use it for examining market-moving events to stay ahead of market changes that’ll affect your trading.

In this case, investors say that the data release is “downbeat,” which is likely to cause depreciation of the related currency versus other currencies. In these cases, you may consider selling the currency that is expected to depreciate. If you are interested in other currency pairs, then you should also look to follow the monetary policies in those countries in the same way as you would do with the countries noted above. For example, if you are trading the Turkish Lira, you should be aware of the monetary policy that is implemented by the Central Bank of the Republic of Turkey . Depicted as yellow/orange/red bars, the impact is a basic indicator of the potential move a data release might trigger on currencies. Shall a bar be red and long, market observers expect this data to have great probability to move the Forex market.

  • Since a sizable part of the US GDP depends on Oil production, a decrease in Oil prices is likely to cause a decrease in the US Dollar exchange rate.
  • We may be a bit biased, but we think that the economic calendar provided by AvaTrade is the best you can find.
  • Monetary policy is formulated and released by central banks and monetary authorities only.
  • For example, Federal Open Market Committee meetings are shown on forex reconomic calendars.
  • This result can then be compared to the market analysts’ consensus to see if the release was better, in line with or worse than what analysts expected.
  • Leading indicators are used to predict when changes in the economic cycle are going to occur, and to predict other significant changes in the economy.

Some of it is released monthly, and some on a quarterly or even yearly basis, and it refers to a specific economy. After all, trading the Forex market means buying or selling a currency pair, and the currency reflects the strengths or the weaknesses of an economy. At the end of the day, what a Forex trader is doing is comparing two economies and making a trading decision based on the outcome of his/her analysis. As a rule of thumb, the stronger an economy is, the stronger the currency should be. This is an understatement though, as monetary policy is a bit more complicated than that. There are several very important economic indicators that are market moving events. For example, the employment report in the world’s largest economy (Non-Farm Payrolls), the United States, will consistently generate volatility.

You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. When you gather some knowledge about it and try trading with its help, you will be able to decide whether to trade after an important report is published or not. The currency exchange will be the market I will use to describe the economic calendar. The reason for that is the fact that data in the calendar are usually connected to the single country economy what impacts a particular currency. Forex traders use economic calendars to track economic data releases and their impact on currencies. The chart above shows the USD/CHF currency pair at the time of this news event. The two lines at the top of the chart represent the two pending orders which you could have used to bracket the price prior to the upcoming Swiss interest rates release.

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And not to mention the final GDP and so on and all repercussions against it. With 17 years’ experience in the financial industry, Frances is a highly regarded writer and speaker on banking, finance and economics. She writes regularly for the Financial Times, Forbes and a range of financial industry publications.