The economic calendar available on Orbex’s website is a fantastic resource for forex traders. Mastering the art of reading the economic calendar can greatly enhance your trading decisions. We all know that major economic events frequently shake up the markets. Knowing when they will happen, and even what’s likely to happen, can give traders an edge. The economic calendar can give some insight into narrowing down potential market action going forward, which traders can take advantage of.
The utility of the economic calendar can be influenced by each trader’s strategies and style. For some, it might be useful to be able to know in advance when there are periods of market volatility that could get in the way of a scalping strategy, for example. For others, who have a more fundamental based strategy, the data releases can be crucial for planning trades. Let’s go over how economic calendars work, and how they are a vital tool for forex traders.
What is an economic calendar?
The economic calendar is a schedule of events, such as data releases and official announcements, that can have an impact on the market. Some calendars include market holidays in them, because that can have an impact on how much market volume and momentum there is. For example, if it’s a holiday in the UK, then the pound will have less trading volume, usually. That means it can behave more erratically, and then “correct” when the big traders come back the next day.
Besides major economic data releases, such as GDP and inflation figures, the economic calendar includes other events that can move the market. Those include things like central bank rate decisions, speeches by monetary policy committee members, and even expected geopolitical occasions, such as the start of the G-7, where major global leaders could make comments that the market could react to.
How does the economic calendar work?
The interface for the economic calendar is pretty intuitive. It has a list of events with the asset that is most likely to be affected, the time when the event is scheduled, and a quick summary of the consensus of expectations. The consensus is compiled by averaging out the forecasts made by several analysts.
For example, before the release of a major economic data point, like a country’s GDP, economists will give a forecast of how much they expect it to be. The different values they give are averaged, and that number is given as the consensus. The market then typically reacts to whether the data is in line with that consensus, or it surprises either above or below that level.
Insight provided by the economic calendar
Clicking on “view levels” for any given event opens additional information, such as how that particular data point has moved in the past. What is even more relevant for traders, is the “volatility” tab. Thatallows traders to review how the asset behaved in the aftermath of the last releases, and get a sense of how much of an impact the data could have.
Additionally, for many major events, Orbex has a full article with a rundown of potential scenarios and how the market might react to them. Those can be accessed in the same blog website. Using the economic calendar, a trader can see if a major event that could disrupt the market is coming, see what kind of impact it has, and often get a more in-depth view of the fundamental analysis that could affect the market.
Stay tuned for next week’s article on how enhance your trading with the economic calendar.
