|Forex economic calendar|
Forex economic calendar is the most important tool which fundamental traders use. This calendar consists of a list of important economic events which could affect the exchange rate of currency pairs. In this article, we are going to discuss the forex economic calendar and the way it influences the market.
The concept of forex economic calendar
Forex economic calendar includes crucial information about the world’s economic events and financial reports. These events can significantly affect the stocks or the currency market. These information consist of financial and statistical reports related to the economical status of countries and some economical indexes such as the budget, income rate and other information about the financial markets. The political approach of central banks is also one of the crucial information that is issued in forex economic calendar.
Advantages of forex economic calendar
- Informs us about the time of economical events
- Informs us about the national holidays of other countries
- Forex economic calendar ranks economical events and financial reports based on their level of importance
- After the market has reacted to the released news, forex economic calendar can be utilized to evaluate the influence of fundamental factors on the market.
How to use forex economic calendar
Fundamental analysis is a trading strategy which traders use for analyzing the market. In this strategy, the most important tools are the statistical and economical data related to the economical status of each country. Macro-economical stats, indexes, bank announcements and financial reports are other factors that can significantly influence the sentiments of the market. Traders are interested in fundamental reports and analyses, because in spite of technical analysis, they don’t need a deep knowledge of technical indicators. Therefore, trading based on news is available for all traders. One of the crucial tools when conducting fundamental analysis is forex economic calendar.
Forex economic calendar applications
Forex economic calendar consists of financial news and events, ranked based on their level of importance. An economical event which is issued in this calendar about a country, directly influences the exchange rate of the national currency of that country.
The most important economical events of the United States of America are:
- FOMC minutes: This event takes place 1 to 3 times per year. Decisions made in this meeting directly affect the U.S Dollar interest rate. Increasing interest rate causes U.S Dollar to rise against other currencies.
- Non-farm payrolls: This report includes information about the non-farm sector of United States and can influence the exchange rate of U.S Dollar against other currencies.
- Oil and oil rig reports: This report has short-term effects on oil futures market. If oil production decreases, the level of demand goes up. If the number of active oil rigs decreases, the supply level falls. In both cases, the price of oil rises.
Some other important events that influence the currency market are:
- Bank of Europe political decisions: During this event, some decisions are made regarding the inflation, bond issuance, money supply, interest rate and deposit rate.
- Macro economic report: In this reports, maters such as Balance of Payment, Gross Domestic Product, inflation rate, price indexes and other economical data are discussed. This report influences the value of the local currency against U.S Dollar.
The above examples are only a part of all reports and events that could affect the global currency market.
Tips on how to use forex economic calendar
- Constantly compare the current data to the predictions. If the present report is positive, but it’s still less than the predictions, it could cause the price of the security to fall.
- Be careful when using filters. If you choose United States in the filter, you may loose the information related to the Euro region.
- You must be aware of the potential impact of news. Keep in mind that if an event is highly expected, it may not affect the market at the time of publication, because this event has influenced the market before. For example, if the U.S Federal Reserve’s intention toward increasing interest rate is expected, no changes may occur in the market at the time of executing such decision.
Pitfalls of forex economic calendar
- One of most traders’ misperception is that an uptrend will start at the time of releasing positive news. In fact, some investors act on the news before it’s even published. Now if the existing data are improved compared to the previous time, but they are weaker than the predicted data, the value of the security will still fall.
- News must be analyzed in conjunction. For example, imagine that two news are published about (USD/EUR) currency pair: Increasing U.S Dollar’s interest rate and some news from the Bank of Europe. In this case, the value of U.S Dollar is expected to increase because of interest rate raise, but no such thing will happen. Because, the interest rate news has already affected the exchange rate of U.S Dollar, whereas the news published about financial policies of the Bank of Europe has caught investors by surprise.
- When news are published, volatility and slippage increase. In other words, there are lots of investors who want to buy this asset, but no one is willing to sell it. Therefore, orders may execute in a price which is not expected by the trader.
Forex economic calendar can be known as a trading strategy alone, but it’s better to consider it a risky trading technique. Keep the following tips in your mind when trading with forex economic calendar:
- When using fundamental analysis, it’s necessary to identify the reversing patterns. These patterns include Pinbar, Head and Shoulder and rising wedge. At last, place price targets (resistance and supports) accurately.
- When a certain news is released, it isn’t necessarily a good trading opportunity. It’s possible that traders forget something important when trading. To increase the accuracy of predictions, technical tools such as oscillators and trend alnalysis indicators can be used for confirmation.
- Don’t be after infinite profit. Close your trade or use a Trailing Stop when you have reached your price target.
- It’s better to do stop out and margin call calculations in a separate spread sheet. Knowing the policies of your forex broker is crucial, in order to be able to calculate the amount of deposit and trading volume.
- Keep the value of your open positions below 15% - 20% of your total balance.
- Believe in yourself. Practice trading in demo accounts, gain experience and don’t be afraid to accept the risk.
If you are interested in trading forex, create a demo account and practice trading with forex economic calendar. You can trade more than 500 global markets in Aron Groups Broker via one of the most up-to-date trading platforms; MetaTrader 5. One of the most important features of MetaTrader 5 is the forex economic calendar, which allows you to participate in any market you want and conduct fundamental analysis.
Written by: Mohsen Mohseni (Aron Groups).