Forex Trading Library

How to Know which Economic Data is Important

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One of the most appealing aspects of technical trading for a lot of people is that it doesn’t require knowing much about complex economics to understand the market.

Specifically, it’s about finding patterns in the market data, not memorizing what PPI, CPI, and PMI are. It is theoretically possible to trade exclusively on technicals and ignore the fundamental side of the market, though it’s obviously not recommended.

If you are trading on technicals only, you’ll probably have these frustrating moments when the technical setup is just perfect, but then the market goes the opposite direction.

Why? Well, because some data point came out and changed investor sentiment.

You might have been looking at a bullish signal for the GBPUSD, but then inflation figures came out from the US and the chart went the other way. A good way to avoid that is to keep an eye on fundamental events, so you aren’t caught off guard.

The problem, and the solution

Of course, when you look at the fundamental things to keep track of, there is a bewildering array of data coming out all the time. Most of the data doesn’t move the market, some do. Some move the market sometimes, while other times they don’t.

How do you know which one to pay attention to?

Well, checking the Orbex blog regularly where there is fundamental analysis about the upcoming major data releases is a good place to start. You can also check out the forex economic calendar to know when data is coming out. The color indicators will be orange and red if the data could have a market impact. But that doesn’t always mean there will be a market move.

Simplifying things

The simplest, if probably least desirable, way to avoid potential unpredictability around economic releases is to simply not trade when there is a data release coming out.

However, that would significantly restrict your trading since there are quite a few data releases that could impact the market. That would be the safest way to trade, and what any responsible broker would do.

On the other hand, fundamental traders are looking for these events to set up their own trades. They must have a system and a way to know which ones are likely to move the market, right? After all, for fundamental traders, it’s not unsafe to trade around data releases, since that’s kind of the point of their trading style.

The best of both worlds

One way to trade economic data releases would be to buddy up with a fundamental trader. That way you help them with technicals and they help you with fundamentals. Sharing information is a great way to get an edge in your trading.

A good trading community, like the one at Orbex, might give you the opportunity to find people with a compatible trading style with whom you can establish a rapport.

Finally, check chatter! If there is an expectation that a bit of data could move the markets, you are likely to see people talking about it on financial news.

Again, being plugged into a good trading community helps with this. If you keep your eyes open for a while, you will get a feel for which data points regularly shake up the markets, and which don’t.

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