How To Use The Forex Economic Calendar?
It’s time to talk about how to use the Forex economic calendar. It’s relevant whether you trade Forex or Binary Options. Even if you use automated software and signals, you must be aware of upcoming economic news. It might influence the market and your bottom line results dramatically. There are different types of economic calendars. However, most of them presented the data in a similar formats. So let me show you how you can read them and use it to your benefits. Following is an illustration of a typical calendar. Below I’ve added explanation of its different components.
The columns of date and time. These are very important to note. When a high impact data releases, the market expected to be especially volatile. Consider it when you apply your trading strategy. Don’t trade right before or right after a major economic events. Of course unless your strategy is built-in a specific way. A method that should take advantage of such sudden and sharp fluctuations.
The currency column. Refers to the main currency that expected to be influenced by the data. Remember that this is a global market. In Forex and binary options we are dealing with currency pairs. Therefore the behavior of particular currency may impact many others directly or indirectly.
Event’s column. Describes the type of data. Sometime suggesting an option for extended information, such as in Forex Factory. The last, by the way is my favorite and probably the most popular Forex economic calendar.
Importance’s column. Indicates the level of influence on the market the data usually have. The higher the level of importance, the greater the expected volatility.
There are typically 3 levels. But you should refer only to the highest one. Don’t waste your time on the minor events.
previous and forecast. The next columns. Previous provides the last release’s data while the forecast reflected the expectations of analysts and economists.
Finally, there’s the actual column. The data itself that is updates right after the release.
So now you know that Forex economic calendar provides us with news released on a predetermined time. It also indicates the importance of the data and thus, the expected market volatility.
Forex Economic Calendar – Key Points.
Many traders with no experience are temped to trade at news released times. However, it’s not simple as it sounds. The Forex economic calendar doesn’t tell us where the market is heading for. So you should not base your trades solely on it. That, unless you truly believe you acquired the sufficient experience to trade during news times.
The fact is that the same data is exposed to anyone else in the world. That including institutional and traders with greater resources. The current price may already embody the new data. So after the release take place it is quite possible that the market will respond in the opposite way to what it should logically do.
Another common mistake is to avoid placing any trades during news. Sometimes missing a good trade because of the speculation that goes with the news, is equal to a losing trade that actually happened. The only case you should avoid trading is if you did a back test to your strategy and the performance proved to be affected and be poorer during these times.
So what you should do?
First of all, follow only the high importance releases. It is hard enough to evaluate the effects of new data. Focus on the important ones and save yourself energy and time. Remember that the market first response is NOT to the data itself, but to how it matched, or didn’t match the expectation. Take as example the next scenario: A new release is set on the Forex economic calendar. The importance level is high. Then the actual figures comes out and they are very positive. However it is still lower than the expectations. This case is not positive, but negative news!
Another thing you should do during releases is to manage your open positions in case you have ones. Consider closing them and re-open later on. But if you decide to keep them, you might want to increase your stop losses and take profits targets.
Especially if they’re close to be reached. They probably will, when the volatility comes. However, and no matter what you do, do it wisely and always keep controlling your risks according to your basic money management rules.
Now that you know the basic of reading the Forex economic calendar you are ready to continue to learn about some secrets of trading the news.
That’s it for now. I hope it was helpful. Let me know if you have any questions you’d like me to address. I appreciate any feedback! Oh, and don’t forget to subscribe to my site. You can do it on the Home Page on the top left corner. See you later!