The PaxForex economic calendar is a universal tool that allows the trader to always be aware of upcoming and current events in the world of finance, economics, and politics. Forex trading processes are largely determined by factors that do not need to be predicted or subjected to complex calculations - it is enough to know the dates and times of important economic events. That's why the first thing that any trader should have in his stock is not even a supreme knowledge of the trading fundamentals or the ability to predict the market direction, but the economic calendar, which allows us to stay on top of global changes in the economy.
Why is it needed for a trader, who sometimes opens and closes dozens of trades per hour or executes no more than one or two trades per month? Every participant of the financial market needs the economic calendar because it is the one that defines strategic ways of traders' work, regardless of the direction they have chosen for themselves.
What is the Forex Economic Calendar?
The Forex trading economic calendar is a special table that contains information about the dates of publication of important economic news and speeches of key officials influencing the rate of world currencies.
The calendar contains information about the dates of announcement of interest rates, speeches of the heads of the US Federal Reserve and EU Central Bank, data on inflation, production, and unemployment. In terms of importance, the data is divided into three types. Some have almost no impact on the rate. The second type can cause a slight change in the value of the currency and not in all cases. The third type almost always leads to strong market volatility.
The purpose of the economic calendar is to give the trader accurate information about the date and time of news release so that he could adjust his trading taking into account their influence.
Financial indicators, which are reflected in the calendar, are published by government agencies of individual countries. They reflect the financial "health" of the economy and are key indicators that show a decline or increase in national production in general.
An indicator of the economic condition of a country is its currency rate. Accordingly, there is a direct correlation between statistical indicators and fluctuations in the value of national money. This dependence can be traced and used for gain with the help of the Forex trading economic calendar.
The calendar provides the following information:
Time of news release - it's always Greenwich Mean Time;
Origin of the news. The corresponding column contains the name of the source country. Often in this role, the national flag is used for clarity.
Formulation of the news. The calendar indicates what the event is. For example, it can be a speech by the head of the central bank of a country, a decision to change the interest rate, or the publication of economic statistics.
Previous result. If an economic indicator is concerned, its previous or current value is necessarily indicated.
Forecast. This column contains the expert community's opinion on what the value of the specified economic indicator will be.
Importance. Each news is marked with a certain color or a certain number of asterisks. This is necessary for the trader to understand the importance of the event. The calendar contains a schedule of both the most relevant and insignificant news.
This structure of the calendar makes its use much easier. In just a few minutes, a trader can understand what to expect from the market today and which events to pay close attention to.
What Does the Forex Trading Calendar Look Like?
Every broker has a calendar of economic events in the Forex market. For example, in PAxForex it looks like this:
Let's analyze its structure in this example.
In the very top line of the calendar, you can choose the date or time period for which you want to see the information. It can be yesterday, today, tomorrow, or this week.
The news table itself is located below. It consists of several columns. The first column contains information about the time the news is published, then you can see the flag of the state and the currency. In the third column, you can see the level of importance of the news, followed by the name of the indicator, actual data (appearing after publication), forecast, and previous values.
Each row of the calendar is clickable. If you click on a row with the name of the news, a window with detailed information will open.
In addition to the basic data, here you can see the source of the report, where the news will be published. Next, you will see information about the indicator itself, its value, and how to analyze the data. In the Chart tab, you can see how things have evolved over the past year, two, five, and all the time tracking. The History tab contains data for recent periods. Here you can see the overall picture of an indicator and assess the prospects for its growth or decline in the future.
Every trader should know that news about the dollar affects not only the dollar itself but all currencies, as well as gold. News on the euro affects only the euro pairs. The attention to the events on other currencies can be not sharpened. In terms of importance, we ignore all news except those marked in red.
The information in the Forex calendar is enough to make a brief analysis of the current market situation for a certain currency pair, as well as to see what the market expects at the time of news release.
How to Trade With the Economic Calendar in Real-time
In Forex trading there is such thing as "rise/fall on expectations". The essence of it is this. Let's say some important economic news is expected soon. According to the expected data, the value of the indicator will rise or fall significantly. The market reacts to the information in advance, so the main volatility for a certain currency pair starts much earlier than the news release and lasts several days. If this situation is already happening in the market, there is a high probability of the reverse movement during the news release or the complete absence of traders' reaction and the immutability of the current price.
The most important indicators are the announcement of the interest rate, the speech of officials who lead the monetary policy of the EU countries and the U.S., data on GDP in the leading countries of the world economy. The fluctuations of currency rates are influenced by employment, inflation, and production growth in Europe and the US. These indicators should be given high priority when planning the trading strategy.
In total, there are scenarios for the news release - the growth of the indicator, its decline, or no changes at all. According to the classical scheme of analysis, the growth is expected to strengthen the position of the national currency, therefore, the rise in its rate. It is the same with the drop of indicators. If the actual data is less than the data of the previous period, a decline in the rate is expected. This is a generalized and rough version of the fundamental analysis of the situation in the Forex market according to the economic calendar data.
Can We Only Trade With the Forex Calendar?
Implementing PaxForex real-time economic calendar is a perfect solution for those who have neither time nor desire to delve into versatile aspects of technical analysis and spend hours monitoring the chart.
There are even traders that do not open the chart when they place an order making use of the Forex trading calendar only.
The point here is to trade with a medium or long-term perspective, drawing upon the expected data release or some other fundamental factors. Given that, psychological levels are used to define the expected profit and potential loss. Nevertheless, we cannot but mention that the implementation of both technical and fundamental aspects of trading will be more advantageous.
Under any circumstance, the Forex trading economic calendar is an inherent tool that can be effective for both medium and long-term traders.
Further in this article, we will consider the technical side, including how the economic calendar can be used for Forex trading.
Trading Economic Calendar - Risk Management
There are several ways to trade with the help of the economic calendar.
Let's have a look at the first one. For instance, day traders, the ones buying and selling assets within the same day, would rather pay thorough attention to the economic calendar. In such a way a trader will be able to estimate the potential risks for the open trades, or will just stay away off the market if market sentiments are mixed. Either way, the Forex trading economic calendar is the first thing to check when you are about to start a new trading day.
The schedule of news/reports for the upcoming week will enable traders to control the trades over a comparatively long period of time.
In other words, the Forex trading economic calendar is an indispensable tool that allows knowing beforehand when exactly the Federal Reserve will hold a meeting regarding the interest rate decision, anything related to the QE program. Having that information traders can get ready for different scenarios and prepare the appropriate plan of action.
Trading Economic Calendar - When to Open a Position?
In order to decide what will be the best time to open positions, it is highly recommended to use the combination of the Forex trading calendar and the technical analysis tools.
The ones who follow that approach make the most out of the price fluctuations after/before the release of the news and report. That is why it is a must for Forex traders to monitor the economic calendar to be always aware of the potential impact on the financial markets, including Forex, stocks, and even cryptocurrencies. By doing so, traders will not miss lucrative trading opportunities and will be able to control the risks for the already open positions.
What Trading Style is Best Suited to Using the Economic Calendar?
There are various types of Forex traders, with different approaches and techniques. It can be either the fast-paced sprint of day trading or the extended marathon of position trading, choosing the right style will definitely maximize the trader`s chance of success. And rest assured Forex trading economic calendar can and should be used with whatever your trading style is. For example, even though swing trading is all about the study of technical indicators and charts, traders will still need to monitor the economic calendar to check for the important news that can dramatically affect the market. By simply reckoning with the released data we can manage the risks properly and, in some cases, it is wise not to trade at the moment of some news at all.
Moreover, the economic calendar is especially helpful for traders that work with the news only. Usually, they place limit orders relying on the forecasted figures or sentiments.
One more trading style that can benefit from the use of the Forex trading calendar is scalping. Since this trading style entails holding positions for a short period of time, the calendar can be used to define the increased price volatility.
As you see, the Forex trading calendar is compatible with all the trading styles.
Interpreting the Calendar
There are different approaches to using the economic calendar in the Forex market. Some traders trade "on the news", i.e. open positions following their expectations of changes in an economic indicator (for example, GDP growth is expected in the eurozone - buy the euro). Others, on the contrary, avoid the news, as trading on it involves some risk. Such traders prefer to wait until the market "digests" the news and enter the already established trend. You should follow the news regardless of the trading strategy you choose. For example, the indicator for the American labor market NFP often causes sharp movements of currency pairs, which can lead to the closing of your orders by Stop Loss.
So, here is what you should pay attention to while interpreting the Forex trading calendar:
- Forecast value
Usually, this value is taken from a survey conducted by an information agency (Bloomberg, Reuters, etc.). These organizations interview 20-240 economists, marginal opinions are taken from the sample, and the average is calculated based on the remaining forecasts. Consensual forecasts may vary from one agency to another.
- Actual value
This is the actual value published by an official source (the statistical service of the country or a recognized think tank).
This is the difference between the actual and the expected value. For example, the PMI was expected to be 50.0 points and it appeared to be 50.3 points. The deviation is 0.3 points.
This is the change in the value for the previous period, usually the previous month. If the revision is large, it may have a strong enough impact on the market. The market reaction will be even stronger if a large deviation is combined with a large revision.
For every important fundamental release, there is a forecast value, which is determined by economists in advance. If the actual value differs from the forecast, market participants will be surprised and will immediately react to the news. The more surprise, i.e. deviation, the stronger the market reaction will be. Based on historical data, you can predict how strong the price movement will cause a certain deviation. For example, if a currency pair continuously passes 50 pips on a certain deviation, it can be expected that the same deviation will again cause a price movement of 50 pips.
Trading on the news requires a certain algorithm of actions. You should open a position only when there is exactly the deviation from the forecast you expected.
The Global Economic Calendar in Real-time!
As we already know, the Forex trading calendar is a helpful tool that makes the process of following economic indicators much easier. Taking into account that there are a lot of these indicators, let's have a look at the most important ones, those that have a strong effect on the currency involved.
Here are the indicators to watch:
The USA indicators
These are the most powerful tools of the currency market and they affect all the currencies of the world, whether you like it or not. If the news came out and the American dollar began its movement, it will certainly affect other currencies. When working on these indicators, of course, the best option is to use the currency pair, which contains USD. Among the most powerful ones are:
Average hourly earnings
This index shows the potential level of inflation and has a significant impact on market processes. This influence is especially visible when key interest rates are expected to rise. In this case, an increase in the index, as a rule, leads to the growth of the currency. The publication of this index takes place on the first Friday of each month at 08:30 EST at the same time as NonFarm Payrolls.
Consumer price index (CPI)
This index is considered as the main indicator of the inflation rate in the country. It is analyzed together with the PPI (Producer Price Index). If a country's economy develops normally, an increase in these two indices, as a rule, leads to higher interest rates. And this is one of the main factors contributing to the growth of the dollar.
The Consumer Price Index is released in the middle of each month (shortly after the publication of the PPI value) at 08:30 EST.
This is the main indicator that determines the state of the economy in the country. Its influence on the market is very significant, because, as a rule, GDP growth is the cause of the national currency rate growth.
The number of new jobs created in non-agricultural sectors per month. It is a very important indicator. It shows how the employment rate in the country is changing. The growth of this indicator has a positive impact on the growth of the national currency. It is called the "indicator that moves the markets". There is a rule in the market, according to which an increase of this indicator by 200,000 per month is considered similar to an increase of GDP by 3.0%. It is issued on the first Friday of each month at 08:30 EST.
It is an indicator of changes in retail sales volume and determines the level of consumer spending and demand. It is commonly divided into: "car sales" and "sales of everything else". Since sold cars are a fairly variable value, the second part of the indicator is more accurate. With the growth of Retail Sales volume, the economy is growing and the dollar is growing. However, the impact of this indicator on market processes is limited. It is issued in the middle of each month at 08:30 EST.
It is a percentage of the unemployed to the total working population. The publication of the value of this indicator occurs at the same time with the Nonfarm Payrolls indicator. Its impact on market processes is significant. And it is often analyzed together with the NFP indicator. Thus, the growth of these two indicators suggests an increase in unemployment in agriculture. When the market expects the growth of key interest rates, the decline of this indicator may cause the growth of the national currency. Usually, it comes at the same time with NFP.
The UK indicators
The economy of Great Britain is one of the oldest, that's why the pound is the most expensive currency in the world and we cannot but count on it. British economic indicators are very profitable in terms of potential returns. But their priority is very different from the American ones.
The most important UK indicator is the Consumer Price Index. It is the strongest indicator and causes high volatility.
Retail Sales is the next most important and strongest indicator because it is correlated with the Consumer Price Index.
Very interesting is the Bank of England inflation report. The indicator has its own specifics. Firstly, a strong momentum follows, then a small pullback, and then the price continues its initial movement at a quieter pace. Therefore, you can hold an open position for several hours. The only disadvantage is that the report data is submitted once in 3 months. But this indicator is worth it.
Forex Calendar Trading - Conclusion
The Forex trading economic calendar is a very practical tool in the trader's work. It allows you to keep your finger on the pulse of the world economy and react to new information in time, but you can not count on the fact that the value of the currency changes linearly.
The Forex trading calendar is useful even for those traders who are skeptical about fundamental analysis. This tool, at least, will allow us to define the periods when the market volatility can be maximum. It is rather dangerous to consider the economic calendar as the basic strategy, but it is an indispensable assistant in the analysis of trading on the news.