How to Use the Economic Calendar to Stay Ahead of Big Market Moves

Using an economic calendar effectively is not only about knowing when a significant market event will happen. It’s also about understanding the factors that matter most to the trader and how they will affect their portfolio.

This useful trading tool is used to track key announcements worldwide and can even offer insight into seasonal trends.

Most traders see them as essential in the day-to-day cycle of buying and selling as they show important details such as release times, country information and importance levels.

Let’s see how traders can get the best value from using this economic tool to stay ahead of the big moves.

Trading Smarter

The biggest fundamental headlines are usually the biggest market movers. Interest rate decisions from the world’s leading central banks, employment reports, GDP and inflation data are key items that economists take notice of. These often cause strong price fluctuations in the market, and as we all know, big moves create big opportunities.

It is also important to compare forecasts to previous data. The best calendars show previous readings, the upcoming consensus (forecast) and the actual result once the data is released. Traders tend to react more to the difference between the actual data and the forecast.

For instance, if the NFP consensus has a job number of 200k and the confirmed number is 500k, this discrepancy is likely to trigger a significant price move for the US dollar, as a substantial deviation from the forecasted number will lead to a dollar boost. These surprise outcomes can be very beneficial to a portfolio.

Can traders benefit from a surprise announcement?

In the lead-up to a high-impact fundamental news event, it’s always important to consider the options. If the data is better than expected, how will this affect the trading strategy? On the flip side, if the numbers are detrimental, what happens then? Considering these two factors will take out the emotional stress of trading in the heat of the moment, leading to a more straightforward path ahead.

The beauty of trading CFDs is that profiting can happen from both buying and selling. Should a consensus miss lead to a reversal of a currency, it does not necessarily mean a damaging hit for the trader, which is also another key feature for the calendar.

As the news event approaches its release time, the consensus reading on the calendar may shift based on the news sentiment, leading to fewer surprises and a more confident trading outcome, particularly during news trading.

Categorising filters by importance or which country it relates to will assist with trading the event.

Most economic calendars allow traders to focus on what markets are most likely to be affected, which in turn could add a lot more value to buying or selling the news.  

These important filters can help prepare traders to focus on specific markets

In addition, another helpful feature is showing traders what actual markets can be affected by one piece of data. As an example, if there is a vital statistic regarding Oil, naturally, the price usually fluctuates. But what about other assets?

In this scenario, the USDJPY pair could also see a significant move. Since Japan imports nearly all of its crude Oil, if oil prices rise, Japan’s import costs increase, which worsens its overall trade balance. On the other hand, falling oil prices reduce import costs, leading to a stronger Yen.

Economic calendars also provide this information, leading to the trader having a more comprehensive outlook on the broader market, rather than just one or two instruments.

Staying Ahead of the Curve

Using a calendar to assist with the financial markets doesn’t have to be difficult. Just think of it like using any other calendar, whether economic or not, which is used to plan the preparation of future events.

An optimised economic calendar offers many advantages. It enables better decision-making by aligning trading decisions with market opportunities and potential risks. Additionally, it creates adaptability, allowing traders to navigate changing market conditions with greater ease.

In a world where the market is constantly changing, having the correct tools by your side is vital, which is why so many traders, on a daily basis, use an economic calendar to confirm their objectives when entering the market.

So check the calendar first to understand what’s coming to plan an efficient strategy. When the big moves happen, you’ll be more ready to take advantage of them instead of being caught by surprise.

 

Plan your trades with an economic calendar. Open your account now. 📊⏰