How to use the forex economic calendar?

What is the economic calendar? 

The economic calendar is an agenda of all important dates, concerning future economic and political announcements, which may have an impact on the markets. This is an indispensable companion of any good trader, as he warns us of potential announcements that will influence the market, and therefore our ongoing operations. For the Forex in particular, this is an indispensable data, the exchange flows can be greatly impacted by an economic or political announcement. His interest is therefore fundamental, and we must take the time to learn how to read, decipher and profit from it.

How to use an economic calendar?

Unless otherwise noted, most economic calendars are presented in the form of tables showing the date studied and the economic news reported there. In the majority of cases, an economic news (which we will now call indicator to familiarize you with jargon) is presented with its description, the estimate for this indicator and its previous value. In some situations, you will also find the currency most influenced by the indicator, and its importance, measured on a rating of one to three, or one to five, etc. Other options are available depending on the economic calendars that You will choose, there are plethora on the net ( consult the economic calendar of Forex.fr ).

Knowing how to read an economic calendar is fundamental, because if the announced value is important, it is mostly the way it is compared to the last issue and EVERYTHING its difference from the consensus (the forecast has been made) that Will play a major role in the evolution of the currency. Indeed, the more important an economic indicator will be published with a "surprising" figure, the greater the probability that the linked currency will be strongly impacted.

What are the important economic indicators?

Some economic indicators are more important, more expected than others. Obviously, it depends heavily on the pair you are dealing with, but as a rule, indicators from the three major economic poles of Europe, the United States and Asia tend to influence the rest of the world . Overall, broad categories emerge:

- Indicators on interest rates  : these are the most important indicators, they are responsible for the biggest movements in the foreign exchange market. Given that interest rate differentials from one country to another affect cross-currency exchange rates, their change, upward or downward, inevitably leads to increases in the volatility of a given pair.

- CPI  : The Consumer Price Index is one of the most important indicators for assessing inflation in a given economy. It is used to measure wage increases, job creation and the active part of the population and the unemployed.

- Retail sales  : In the same spirit as the CPI, this indicator measures the strength of consumption, as well as the behavior of retail trade. Generally speaking, it often makes it possible to make forecasts on the evolution of other indicators.

- GDP  : The Gross Domestic Product is obviously one of the most important indicators. The Gross Domestic Product representing the total value produced by a country over one year, its evolution and its announcement are widely expected. This indicator tends to be considered staggered, so economists expect expectations published a few months before the actual figure.

Of course, other important indicators exist on a case-by-case basis, such as non-farm payrolls in the US for EURUSD or USDCAD, and it takes time to get to know these indicators well before embarking on a Where economic news may be announced during its term.

Can we simply trade the economic news?

This is an issue that many beginner traders have come to regard as an opportunity. It is true that, taken for what they are, economic indicators, especially the most important ones, are, if well anticipated, potential sources of large profits. Nevertheless, it should be remembered that these indicators do not always turn in the desired direction, and that failure to anticipate them can be catastrophic. A very slight upward correction followed just after a big drop can be one of the examples. Overall some profiles of traders could probably only deal with economic news. These are sufficiently numerous to create significant gains.

How can we position ourselves in the face of an important economic event?

Above all, it must be reactive. The main quality of a good trader, besides his composure and his ability to anticipate, is responsiveness. As a general rule, many forex traders arrange to be out of the market at the time of the publication of a material news. They cut their positions in progress, and even sometimes in slight loss, lest a bad news for them will cause disaster on the wallet. Then you have to be attentive to the news. The market often reacts very quickly to advertisements, but do not rush either. Wait a few moments, 30 seconds for example, may be a good idea to make a projection of the announced trend. This cuts some of the profits but also reduces a lot of the risks. And a good trader is above all a trader who does not lose money before winning. For the rest ... "Let your profits run and cut your losses short"