Most forex market brokers provide a range of tools to help traders along in their trading journey. One of them is a forex economic calendar. It’s also one of the most important.
The humble yet powerful economic calendar provides traders with a view of all the most important news events and upcoming economic data releases globally. Why is this tool so useful? The economic calendar keeps traders and investors in the loop of every market-moving event that’s upcoming, allowing them to plan their trades and strategies accordingly.
In this article, we’ll cover the economic calendar in greater detail, why it’s so important to follow, and how to use the calendar correctly. We’ll also look at the most important calendar events to look out for. Let’s go.
What is an Economic Calendar?
The economic calendar highlights significant economic events that often influence both the global economy and the global markets. The forex economic calendar provides a schedule of upcoming economic events that have the potential to impact various financial markets such as forex, shares, indices, commodities, bonds, and many other markets.
Regardless of which trading time frame you lean towards, monitoring these data points is an essential part of planning for any trader. This applies whether you’re a short-term trader or a long-term investor.
Staying informed about major economic releases and the market’s expectations is crucial to trading based on informed decision-making and proper insights. If you’re unsure where to find one, many FX trading brokers offer this tool for traders on their website.
How to Read the Economic Calendar Correctly
Understanding how to read an economic calendar and being able to translate its insights into your trading is key to staying informed about the macroeconomic events that can impact the markets.
The forex economic calendar can display up to 4,000 events, including central bank meetings and high-profile speeches. Essentially, it’s your very own snapshot view of the world economy.
Major announcements like the US non-farm payrolls, CPI, PPI data, and manufacturing figures from major economies like the US are always watched closely by traders.
Another handy feature about the economic calendar is that it’s also customizable. Traders can sort events based on parameters such as date, country, timeframe, category, or market impact.
Events are categorized into high, medium, and low impact levels, backed by extensive historical data analysis. This categorization helps traders to cherrypick announcements that are likely to have a stronger influence on the markets, often measured by how volatile the markets become once the data is out.
Moreover, the calendar enables forex traders to delve deeper into specific countries, providing access to charts depicting data like interest rates and GDP and facilitating comparisons with other nations.
A good tip is to tailor the calendar to your own preferences and trading strategy in order to link those insights even more to your specific trading plan.
You can filter events based on relevance to specific instruments or asset classes you want to trade. This adaptability will keep you in the loop and help you eliminate the additional information that won’t help your strategy.
How to Use an Economic Calendar for Forex Trading
When you open the economic calendar, traders need to be aware of the vital information associated with each event.
First and foremost, take note of the time and date of the events you’re interested in, ensuring the time is set to your local timezone. Familiarizing yourself with these timings will make sure that you’re prepared for the market volatility.
Significance is denoted by stars, with three stars indicating events of strong significance that typically lead to high market volatility once released. One star denotes low-volatility events.
For data releases like CPI or NFP, you will see two values provided. This included the expected value and the actual value. The expected value represents the market consensus based on economists’ forecasts. The latter is updated upon release.
For instance, let’s take the example of US CPI data, a highly significant release occurring monthly. Suppose the current US CPI stands at 3.5%, while the upcoming release is expected at 3%, lower than the previous.
Understanding the forecasted value here is what’s important. In this scenario, a decline in US inflation historically favors the US dollar and can negatively impact gold and stock prices. So knowing how to read the data in real time can help traders navigate the market’s next move once the data is out.
But it’s important to remember that these interpretations are guidelines. Economic releases like US CPI can trigger highly volatile price swings before the markets establish a clear direction. So traders should always remain adaptable when trading economic releases.
How to Customize the Economic Calendar
As we mentioned before, traders can customize the calendar based on category, countries, time, and significance. This calendar filtration system will save you time and help you filter out unnecessary information related to your trading.
Oftentimes, you will also find a keyword search bar. Traders can utilize this feature to search for a specific query across the financial markets. For example, searching ‘unemployment’ will highlight any countries with upcoming jobs-related data
The country filter lets you select from dozens of countries, only displaying economic events taking place in the regions you have selected.
Important Events in the Economic Calendar
As you know, certain announcements are regarded by traders as more important than others. Why? Because they bring about bigger volatility, and their impact on the global economy is significantly higher. Here are some of the most impactful events that traders watch:
- US Non-farm payrolls (NFP)
- US Unemployment Rate
- Central Bank interest rate decisions
- Consumer Price Index (CPI)
- FOMC Meetings
- Retail Sales
- Consumer Confidence Index
- EIA Crude Oil Inventory
- OPEC Meetings
- Producer Price Index (PPI)
- Gross Domestic Product (GDP)
Conclusion
In conclusion, the forex economic calendar should always be fixed in your top list of tools because it provides you with a detailed overview of significant market events that you need to always remain one step ahead of.
For traders looking to trade with the best forex broker Dubai has to offer or seeking insights from a reliable FX trading broker, finding one that offers a comprehensive and easy-to-use economic calendar will always help you to optimize planning and execution when it comes to trading.