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Economic Calendars and Forex Trading

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An economic calendar keeps track of important news events and announcements that could affect the movement of a specific asset or the market as a whole. Economic calendars serve several different purposes and are especially useful considering that a lot of financial information can be released in a very small time span. If you’re looking to trade the news, then this is a must-have tool, although every forex trader needs to use one. This is what you need to look for on an economic calendar:

  • Monetary policies related to interest rates: this is related to changes in current interest rates imposed by national banks or when national banks or other accredited institutions make predictions about where interest rates will go. 
  • Monetary policies related to inflation: inflation is closely related to interest rates because national banks will adjust their interest rates to lower inflation.
  • GDP: this is the ratio of imports vs exports in a country. Having more imports versus exports generally signifies that a government is in debt, which is bad for investors. 
  • Employment rates: this is one of the main indicators of whether an economy is thriving. Investors typically steer clear of countries with high unemployment rates.

Investors need to be aware of the above because it gives them an idea of how the economy in a country is doing. News releases, especially related to finances or government policies, cause investors to make decisions. Some of these items are announced monthly, while others are released quarterly. 

In addition to keeping track of economic impacts, economic calendars also serve several other important purposes for forex traders:

  • They can tell you when to enter or exit the market: many traders enter or exit the market based on events that are indicated by their economic calendars. Trading in the direction of news events is one of the most popular trading strategies. Do keep in mind that unexpected events may take place, so it is good to have risk-management precautions or to look at other data.
  • They can help one to avoid an extremely volatile market: some volatility is good because it presents a number of opportunities to buy and sell, but too much volatility is dangerous for traders. It is more difficult to analyze the market when it is more volatile. Your economic calendar will let you know if there is going to be bad news so that you can avoid trading in these conditions altogether. 
  • They can help you get ahead: many beginners ignore economic calendars because they don’t understand how they work or how efficient they can be. Using one can help you get a better start than those traders, and it can also be helpful to those keeping a trading journal. You’ll be making better, more informed decisions and you’ll have more information to log. 

Economic calendars keep track of a lot of information. This is one of the main reasons that many beginners don’t bother with them. Many of these calendars will allow you to filter events by importance so that they can be used more efficiently. Events are labeled by colors to indicate the expected impact they will have on the market. Yellow indicates a low-impact event, orange indicates a medium-impact event, and red signifies events that should grab your attention. As you become more comfortable using an economic calendar, you’ll become more aware of what affects the market significantly and what doesn’t. 

As we conclude this article, we will remind our readers that economic calendars are must-have tools for any trader. Whether you’re just getting started or you’ve been trading without one, you need to learn how to use them to make better trading decisions. If you’re wondering where to find one, you should know that many brokers offer economic calendars on their websites for free. Try checking the education or tools section on your broker’s website. If you don’t have a broker yet or if your broker doesn’t offer them, then you can do a quick Google search for “forex economic calendar” to find many different options online.

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