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 so, a forex trader can adequately anticipate when major movements will take place.
Importance of an Economic Calendar to Forex Traders
Economic news has a tendency of drastically affecting the forex market as a whole, and whether the financial market conditions are met or not, an 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, 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 covers all economic events and indicators around the world. With this, forex traders can, with time, ascertain what to trade, when to trade, and how to avoid major price fluctuations. As such, an economic calendar gives forex traders the information they need to develop an effective trading strategy.
How to Read an Economic Calendar
All the data enclosed in an economic calendar is displayed in chronological order. The news release dates are marked on the time column with a tick, with todays events marked under the yellow bar showing today’s date. After a data release, the economic calendar is refreshed automatically.
A flag icon in the economic calendar indicates the country of a particular data release, and the country’s currency is usually noted next to it. This feature gives forex traders the ability to determine which currency will be affected, and on what days.
The volatility rate icon is the red, yellow or orange square shown in the table above. It is used as 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 release is likely to affect the financial market. If a yellow square is shown, then it is less likely to affect it.
In conclusion, an economic calendar indicates more than 1000 events from various countries, as well as related news and reports. It automatically refreshes when data is released and provides a countdown for future releases. It is mobile friendly, it provides forex traders with historical graphs, and it includes a sound notification whenever a new release is out. As such, it is a very helpful trading tool.
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