The economic calendar is interesting in that it contains a lot of information about events that are likely to influence the market: the name of the event, the date and time of the event, the level of importance of the event proposed by some calendars, the value of the event, the previous value of the event and the consensus that corresponds to the expected value.
How to use an economic calendar for trading?
An economic calendar is undoubtedly one of the most precious tools of Forex traders as it enables you to identify the best indicators for numerous currencies.
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An economic calendar: What is it?
The economic calendar could be explained as a type of agenda on which all the upcoming major financial events are listed, as well as certain political events that may exert an influence on currency rates.
Of course, with an economic calendar, we know the dates of major influential events in advance which enables us to forecast the effects in advance and thereby anticipate any accelerations or reversals in a trend.
It is therefore strongly advised to closely monitor the calendar to detect the best upcoming opportunities.
How to interpret an economic calendar?
The vast majority of economic calendars that you find online are displayed in the form of a table. The data given is classified by date and chronological order. It generally includes several columns such as:
- The name of the expected event
- Time of event
- The level of the event’s importance (for only certain calendars)
- The event price
- The preceding price
- The consensus (or expected price)
Some economic calendars even go as far as stating which assets may be impacted by the announcement.
In this case, the economic calendar is highly important. For this you should above all take into account the difference between the value of an event and its preceding value using the consensus. It is the difference between the consensus and the true price that will determine the movement direction of the asset.
The Indicators of the economic calendar not to be missed:
Of course, not all the data contained in the economic calendar are going to interest you. It is therefore necessary to be able to identify, in case the calendar you use does not mention it, the assets that will be impacted by the new and the level of this impact.
The following indicators are important when trading with CFDs:
- Interest rates: These are set by the major central banks following monetary policy meetings and have a very strong influence on currency pairs. But most of the time, these rates remain unchanged.
- GDP: It is also an essential indicator in the sense that it generally represents all the wealth produced by a country or group of countries annually. A big change in this figure usually generated significant changes.
- The consumer price index: Also known as the "CPI", it measures the level of inflation in a country or geographical area based on wages, labor force and unemployment.
- Retail sales: It allows, just like the consumer price index, to assess the level of purchasing power of a country and therefore its inflation. It is mainly used to predict future changes of other indicators.
- Employment and unemployment figures: Highly valued by investors, these statistics generally reflect the level of growth of a country and can therefore be a sign of a possible change in the latter's monetary policy.
Of course, depending on the currency pair you're following, other indicators may be important. We know for example that certain currencies are influenced by the changes and shares of raw materials.
In addition, it is essential to never use the indicators from the economic calendar alone, but to add this information to that of the fundamental analysis.
Other basic data not found in the economic calendar:
Even though the economic calendar is a very important source of information when investing in the financial markets, to keep you informed of the events that influence the price of assets the most, it is possible to find basic information in other places other than on this calendar.
Also, if you trade shares on the stock market, it is important and even advisable to consult specific data related to the economic publications of the company that issues the securities. Among other things, the data of the results, profits or turnover are essential.
You can also subscribe to information feeds about the shares that you normally follow and that will allow you to daily read fresh news from the markets.
You should also be aware that on the trading platforms, market news are published over time and are accessible for free by user traders.
Can we rely only on the economic calendar to set up a strategy?
Even if the economic calendar is an essential tool for the creation of an investment strategy, it is not enough to make sure profits on the market. The economic calendar should in fact be used in parallel with the technical analysis.
Indeed, even if events and basic data have a strong impact on the price of assets, you should remember that the investors also base their strategies on graphic and technical data. It will definitely be a mistake to ignore this data.
A complete and efficient analysis is therefore a combination of technical analysis and fundamental analysis thanks to the economic calendar and other tools such as trading signals or technical indicators.
A comprehensive and effective analysis is therefore a mix of technical analysis and fundamental analysis through the economic calendar and other tools such as trading signals or technical indicators.
Frequently Asked Questions
How to trade using economic announcements?
Many traders implement a trading strategy based on the economic announcements in the economic calendar. To do this, they focus on a major economic announcement, which is often synonymous with volatility in the market. So it is important to know if the consensus has been incorporated by the market and to see if there is an announcement effect that changes or accelerates the trend at the time the event occurs. Of course, this method of trading requires great concentration and availability at the right time.
Where can I find a good economic calendar?
The economic calendar is an essential tool if you want to make good fundamental market analysis, but you still need to find a good one that includes the right information. Most of the time, you will find high quality economic calendars on the platforms or websites of online brokers and dealers who offer them to their users in order to help them set up good strategies with complete elements.
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