Introduction
It is paramount for traders trading in the forex market to be informed about global economic events. Traders can easily rely on economic calendar as it is a strong tool that helps them to monitor and forecast economic releases that might influence their future trading choices. It is an effective tool that traders may use to plan their trades. Traders are mindful of potential chart patterns and indications that might influence their transactions as the economic calendar alerts them.
What is an Economic Calendar?
An Economic Calendar of a country is the schedule of upcoming economic events, data releases, and announcements. These economic events may include a wide range of economic indicators, like employment data, figures of inflation, interest rates decisions, GDP reports, current economic sentiments of specific markets, and many more. An economic calendar can be consulted as it acts as a fundamental analysis tool to gauge the potential impacts of these events on currency rates.
Importance of Economic Calendar in Forex Trading
It is believed that Economic Calendar is the key to success in the forex market as it is highly sensitive to the economic news and events. Values of currencies are often influenced by changes in economic conditions. It gives insights to a trader as to why exactly the market is moving in a certain direction, meanwhile the traders may also be able to predict or anticipate these moves of the forex market in advance. Seasoned traders examine the events in the live economic calendar daily to predict the movements of currency pairs.
Keeping an Economic Calendar at their disposal is a simple and effective way for traders to monitor information of financial events, news, and statements.
How to read an Economic Calendar?
It usually lists the most important events and data releases from major countries across the globe each day. Economic Calendars lay out the dates and potential impacts of the schedules national and international events that are likely to have an impact on the price and popularity of the chosen markets and assets. Traders choose to pay attention to a day, week, or a month which helps them to plan their trades accordingly. This maximizes their profit potential.
Given that they have foreseeable effects on trade sentiment and volume, recurring news events typically form the strongest indicators. Although other worldwide events can influence market volatility, the economic impact and timeline of isolated occurrences are not very certain and can thus make trading a little more difficult.
Working of an Economic Calendar
There are several iterations of economic calendars. Typically, they include a description of the event, its time and date of scheduling, as well as its prior, expected, and actual values. The projected value reveals the numbers that the market anticipates from a release. It can be an absolute value, such as the level of an index in points, or a percentage value signifying a change in the indicator's level. The report's most recent value that has been recorded is taken as the previous value. Before the actual event, these figures, particularly the projection, have an impact on market sentiment and price movement.
For instance, the value of the national currency declines relative to other currencies if the market anticipates that a country's unemployment rate would be higher than the previous one. This occurs because of the currency losing appeal to investors as a result of the rising unemployment rate signalling the country's deteriorating economic health. The price of this currency then drops as a result of many traders taking short positions.
Conclusion
It is imperative to have access to an economic calendar in forex trading. It provides traders with information about upcoming events in world economy. As a result, dealers move about the market with more assurance. If the traders have the know-how of understanding the significance of economic indicators and their predicted impact on currency values then, more often than not they are able to make well-informed decisions and manage risks efficiently. It is recommended that economic calendar must be looked at before going further to trade.