An economic calendar is a forex trading tool which includes important financial information like consumer prices index, insurance rates, employment reports, non-farm payroll numbers, purchasing managers index, GDP reports, inflation reports, confidence data and speeches by central banks. Forex traders use economic calendars to track market-fluctuating events by means of data research. By doing this, a forex trader can adequately anticipate when major movements will take place.
Importance of an Economic Calendar to Forex Traders
Various economic news content has the tendency of drastically affecting the forex market as a whole and whether the financial market conditions are met or not, economic news release can cause a rapid fluctuation of price actions and spreads increment. Forex market spreads are variable. Variable spreads come as a result of fluctuations meaning they will not remain the same and will change as liquidity providers change their pricing. Usually, most economic news releases cause an increase in volatility rates which in turn leads to periodic liquidity in the Forex market eventually making the choice of entering or exiting a trade at the desired price difficult. This is where the importance of a forex economic calendar comes into play.
An economic calendar has the feature of covering all economic events and indicators all over the globe. With this, forex traders can ascertain in time, make a proper trading decision on when to trade, when to enter or exit a particular trade, the right currency, commodity or security to trade, how to avoid major price fluctuation scenarios, and generally get acquainted with market movements. An economic calendar gives forex traders the ability to develop effective and functional trading and a risk management strategy that minimises losses and maximises profits.
How to Read an Economic Calendar
All the data enclosed in an economic calendar is displayed in a chronological order with a daily format. The news release dates are marked on the time column with a tick where todays events are marked under the yellow bar showing today’s date. After the release of new data, the economic calendar is refreshed automatically.
A flag icon in the economic calendar indicates the country of a particular data release and its currency is found beside it. This feature gives forex traders the ability to determine what currency is affected in a day and other days.
The volatility rate icon is a red, yellow or orange square shown in the table above, which stands an indicator of the possible impact of a data on various currencies. If a red square is shown in the economic calendar, then it indicates that the data provided has a great probability to move the financial market but if the square yellow, the reverse becomes the case.
In conclusion, an economic calendar indicates more than 1000 events from various countries with related news and reports. It automatically refreshes when data is released and provides a countdown to the time before the release of more news. It is mobile friendly, it provides forex traders with historical graphs, and includes a sound notification whenever a new release is out.
Ready to learn more about forex trading? Find more articles in our education section.