The Importance of an Economic Calendar

When using the economic calendar, traders gain a better understanding of market changes, the reasons why they change, a prediction of by how much the market will change, as well as a look at past events that have changed the markets and by what percentages.

Why use an economic calendar

• Traders can track occurrences of market moving events and measure their effects

• Anticipating major market events and act on their performances

• Stay abreast of crucial market movements that can affect your open trades

• Follow key economic and non economic indicators

• Events that influence the movements of a particular currency can be closely monitored

Fundamental analysis for Economic Calendar

Experienced traders know how to plan and perform their trades according to the calendar both before and following the events. Using the economic calendar is part of Fundamental analysis, trying to predict which way the market will go in order to make informed and wise trades.

Before an event from the calendar takes place, the trader will study the general state of the economy, review similar past events and more. Based on those factors and others, he will try to speculate the effects the event will have on various instruments. This is the basis of fundamental analysis – predicting the market trends based the current finance situation, past patterns and volumes etc.

Some traders, usually more experienced ones, will open positions before the financial event. If such a trader speculates that the announcement will bring to a rise of the instrument’s value, he will open a buying position prior to it, in order to sell it once it will go up and take profit. Other traders, however, will linger with their trades until after the announcement as part of their risk management.

Examples

On the first Friday of every month, the U.S. Bureau of Labor Statistics releases the overall number of employees in the US, excluding some fields such as government workers, agriculture and non-profits. This report is called the ‘Non-Farm Payroll’. It reflects approximately 80% of the US working force. Financial news desks and companies post forecasts relating to this announcement.

This triggers attention by traders, anticipating the announcement and trying to predict and plan trades. Once announced, traders compare the report to their speculations before the release. If the rate is better than forecasted relevant markets will experience a rise. A higher unemployed number, however, will cause most markets to decline. The non-farm payroll can affect the many other fields such as costumer consumption rate, stocks and more. This is why it is considered an event with major financial influence.

It is important to bear in mind that any trends that occur after the event is also influenced by many other factors. There is no certainty the market will react the exact same way every time, since there are many other elements that affect it.

Option Capital TradesMarket’s Economic Calendar

It is would be wise for all traders, regardless of the instrument, to follow up closely the Economic Calendar. As seen in the example given, any event might affect several instruments. Trading side by side the calendar will help you understand the market and stay on top of it. Accompanied by time and practice, the calendar can improve your fundamental analysis and predictions based on upcoming financial events.

Economic Calendar main FAQs

• Why is an economic calendar an important tool?

  There are many economic data points that are released from countries all around the world. These economic reports have an impact on financial markets, from currencies to commodities to stocks and bonds. Without a good economic calendar, one that is complete with all the important economic releases, any trader could get blindsided by an unanticipated market move. For example, manufacturing data is often important for the stock market, and for certain commodities like crude oil. A positive manufacturing data report can lift markets, while a poor report can cause sharp selloffs. If you aren’t aware of upcoming reports like this you could easily be on the wrong side of a trade.

• Where can I find the best economic calendar?

  We may be a bit biased, but we think that the economic calendar provided by Option Capital Trades is the best you can find. It has all the important economic releases you’ll need when trading the markets. You’ll be able to quickly see when various countries are releasing employment data, GDP, inflation data, and many of the other economic indicators that can drive markets higher or lower. Combine our economic calendar with our education centre and you’ll be on the way to having all the tools you need to perform accurate and useful fundamental analysis of your favourite markets.

• How do I use an economic calendar?

  If you want to properly analyse any market it is critical that you have all the relevant information, and that you know how to use it. The economic calendar will deliver all the relevant information about when you can expect certain market moving data to be released. Once you’re aware of the release of this data you can go find out more about how the data moves the markets, and what to expect from the current data release. Based on that information you can develop a hypothesis on which assets you should be buying, and which you should be selling. If your analysis is correct you can expect your trading account to continue growing.

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