What is the Economic Calendar?
An economic calendar is a type of fundamental analysis that helps traders to understand about the forthcoming events that can affect their trades. This article will help you learn how to interpret a Forex economic calendar to make plans, minimize risk, and carry out strategic trades.
An economic calendar is a source of information that enables traders to know the vital economic information slated to be published. Such vital information includes GDP, Non-Farm Payroll report, and the Consumer Price Index. It also helps to ascertain the date of the subsequent central bank meeting or some vital news announcement. The events shown on the calendar are grouped into three categories, high, medium, and low depending on the probable impact on the financial markets.
How to read the Economic Calendar
Knowing how to interpret the economic calendar correctly is significant in maximizing your trade before and after the announcement of important news. Analyzing the calendar every morning will enable you to deal with forthcoming events.
When the calendar is set in a default mode, it will display every single piece of economic news that arises from the major economies. For some traders, it might seem too detailed, so it is advisable to customize it whichever you want.
Customizing your economic calendar view
Customizing an economic calendar is not a difficult task. All it entails is checking out the past events, present events, and future events, by clicking on the right buttons like Today, Tomorrow, Next seven days. It’s also okay to change the time zone to the one that suits you properly; this can be done by clicking on the Time zone button. The next thing is to click on the currencies you want to analyze.
For instance, when trading the EUR/USD and you want to analyze the present vital news emerging from the United States and the Eurozone, you’ll choose the USD and EUR buttons, and that will display only the Eurozone and the US news statements with a high tendency of influencing the movement of the market.
You can select any event that interests you to get more information about it, the whole news surrounding it, and also carefully analyze it.
The motives behind the use of an economic calendar
- The most important benefits of using an economic calendar for Fundamentals analysis includes:
- The ability to regulate risk properly
- The ability to plan
- Choose the right moment to open or close a position
- Good risk management.
The ability to carefully plan your trades based on the information gathered from the economic calendar helps you to prepare your mind for any upcoming price fluctuations. When an event documented on the calendar happens, there might be a shift in price if the information is published in line with outlooks or not.
Good risk management
Acknowledge the principle of good risk management when it comes to trades. Risk is referred to the disparity between an entry price and stop loss price, multiplied by trade size. It is advisable for traders to keep the risk up to a 2% of account equity per trade.
The economic calendar enables traders to plan. For instance, if a Non-farm payroll report is slated to be published, traders are very much aware that this signal can move the forex market substantially; this will give them an edge to plan their trades ahead of time.
Possessing additional features to customization
Depending on the trading platform you use, a trader should be able to customize their calendar to fit their trading strategy. You can select the timeframes, apply filters, and set signals to make them more suitable to your particular trading method.
Bear in mind that the market does not always obey the logic of economic data. Traders look forward to the anticipated announcements and thus actions that follow can be reasonably favorable, if anticipated, or rough if it doesn’t align with previous expectations. That’s why it is important to use the Forex Economic Calendar for a proper fundamental analysis.
It is advisable to first try out the calendar using a demo account, as this will enable you fully grasp how to utilize the fundamental analytic tool. You’ll be able to learn how the data impacts the prices of currencies and different financial assets, it will also allow you to track the effect of the economic calendar on online trading.