Are you having trouble reading the economic calendar? Then this article is for you. An economic calendar is a vital tool for day traders conducting fundamental analysis for their trades.
The foreign exchange market turnover is approximately $7.5 billion per day in April 2022. As the forex market is one of the most volatile markets in the world, it requires much knowledge and practice.
Moreover, trading with an economic calendar helps traders make informed trading decisions and book more profits. In this article, we will get you through a detailed guide about the economic calendar.
What is an Economic Calendar in Trading?
The economic calendar allows you to seek through different economic events, which might influence a country’s economy and can help you plan your trading strategy. It is an efficient tool for professional trading. It helps traders to identify the market volume and the profitable opportunity in forex trading.
An economic calendar often lists upcoming events along with their times, dates, and other pertinent information. Events like central bank interest rate decisions, job reports, GDP releases, consumer pricing index (CPI) statistics, retail sales figures, and geopolitical happenings are just a few examples of the huge range of events that might occur.
Tips to Trade with Economic Calendar
Let’s seek tips on how you can trade with the economic calendar.
1) Look for a Reliable Economic Calendar
The first and most vital tip is to look for a reputable economic calendar for your forex trading. That economic calendar must provide accurate information on upcoming economic events, which includes interest rates, employment reports, inflation data, and interest rate decisions.
2) Observe High-Impact Events
As a trader, it is essential for you to focus on the high-impact events that might influence your desired trading market. These events typically include central bank announcements, major economic indicators, and geopolitical developments. In most economic calendars, high-impact events are denoted by symbols like exclamation points or three bullheads.
3) Understand the Specific Event
If you have identified the upcoming, it is important for you to analyze its significance which can influence the market. Analyze the event to see how it can affect the respective currency pairs, stocks, or indices. It will give you a clear idea about the impact of the upcoming event.
4) Define your Strategy
Once you have analyzed the upcoming event’s impacts and effects, it is important to plan ahead. Choose whether to trade before the event, during the release, or following the market’s initial response. You can reckon factors like profit targets, stop-loss orders, and entry and exit points.
5) Practice along the Way
It is indispensable for you to practice the economic calendar. It will improve your experience and skills. You can take leverage from demo accounts or start with small investments at your initial stage. A journal to record your trading performance will also help you identify your weaknesses.
Top Events to Consider in the Economic Calendar
Interest Rates Decisions
It is one of the top events to consider while using the economic calendar. The central bank, regularly, announces the interest rates by monitoring the economic health of a nation. The interest rates affect the domestic economy of a nation.
PMI – Purchasing Managers Index
It is also an important event that indicates the manufacturing and services sector happening in a country. If a PMI level is above 50, it shows an increase in the value of a currency. In contrast, if the PMI level is below 50, it shows a decrease in the value of a currency.
Geological Events
Important geopolitical occurrences like elections, referendums, and trade talks can affect a variety of markets, currencies, and commodities.
Conclusion
Nowadays, trading has become volatile and faster, so it is important to understand the market’s ups and downs. The economic calendar provides you with vital information about economic events of different nations that might push or down your desired market. The above article describes how you can trade with the economic calendar for your trading.
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