The forex economic calendar: why you need it and how to use it
Trading on financial markets is only 1% luck and intuition and 99% knowledge and awareness. Success in trading is based on making of forecasts on movements of assets, which seems to be chaotic and unpredictable, but in fact follows the general rules of market.
The economic calendar was created for traders to keep abreast of key news and events at the market. Everyone who wants to trade on Forex has to be able to use it, but it is better to study it attentively.
What is an economic calendar?
All trading assets - ranging from currency pairs to oil and gold - are exposed to general economic external factors such as inflation, unemployment, changes in credit rates and so on.
changes in lending rates by the central bank and many other things. All of these non-obvious things ultimately affect any market commodity offered to other participants. Given that we are all participants in an endless trade, exchanging our money for goods and services, these indicators also affect us and are especially important to forex traders, for whom trading is a profession.
The economic calendar is a summary of financial and economic indicators of countries around the world that affect the market value of exchange-traded instruments:
currency pairs; raw materials and precious metals; stock indices; stocks and securities; cryptocurrencies. A summary of the economic calendar can include a variety of events, and the task of a trader is to interpret the information received correctly and use it in his or her trading strategy.
Important events in the economic calendar
The calendar is not a difficult thing to do, as long as you learn how to filter the events according to their importance for your trading strategy and assets, so you can buy or sell at a good price. The following indicators deserve close attention in the event summary:
economic growth parameters; inflation index; the Central Bank interest rate; unemployment rate; increase in real estate sales; retail trade turnover; fluctuations in the value of securities. The most important indicator remains the level of economic growth, which to a large extent determines the dramatic financial changes in the stock market and global trading market.
It is made up of three factors: consumer opportunities, investment and fiscal spending which together determine the growth rate of a nation's economy.
The indicator is published monthly with revisions after 3 days and 10 days from publication, so it is important to take into account the adjustments made at these points. The indicator should be used very carefully.
If a decline in purchasing power takes place over a number of months, trade volume will also fall and with it output, which will have a negative impact on the country's national currency.
Inflation arises when demand exceeds supply and drives up the cost of goods and services, negatively affecting purchasing power. Sometimes it is caused by rapid economic growth and is low, but when it is several times the rate of growth, one can expect currency depreciation and economic chaos.
Slightly less important will be the Central Bank lending rate of commercial banks, an increase of which will reduce purchasing power and negatively affect the real estate market by increasing the value of this indicator.
Other indicators like unemployment, the price of securities and retail trade turnover have varying degrees of influence on the Forex market, but not as much as the first three factors. They should be considered depending on the chosen asset and strategy, taking into account its urgency.
In short-term strategies, you can ignore changes in inflation or economic growth, while news, statistics or statements of the Head of the Central Bank can greatly affect the value of an asset.
Medium-term and long-term trading strategies are more demanding when it comes to the economic calendar, and they require consideration of all factors, even if their significance is not obvious.
The economic calendar is an important and effective tool in the arsenal of every Forex trader, who wants to be successful and earn stable money trading the market.
Scattered and varied information does not allow you to follow all events from primary sources, but the calendar gathers all data into one summary, giving you concise information about the most important things. Only by learning how to use the economic calendar, a trader will not get lost in the complex world of finance and stock trading.