Today we are going to introduce you to a tool that many of you are interested in, the economic calendar , and its impact on Forex trading. It is constantly updated so that you have access to it depending on the day you consult it. To begin, let's see what this tool is and why I tell you that it is a tool that should be of great interest to you if you are trading currencies (or any other type of asset).
An economic calendar, as the name suggests, reflects when and what economic issues will be released globally. It can be the decision of a country's interest rates, production price indices, trade balance, economic events. In short, it tells you about any event that may affect the economy and financial markets.
As you know, in the Forex market (as in all markets), price movements are influenced by news, macroeconomic data, government decisions, etc. Therefore, following an economic calendar lets us know when the biggest moves in the market will take place. We can even use it to know when not to trade or even, as some traders do, to trade information.
Depending on how often you trade, if you do swing trading (trades that last several days), it may have little relevance to your trading, just check it once or twice a week. If, on the other hand, you are a more aggressive trader, checking the economic calendar every day can give you an optimal view of the market.
Every day many economic indicators are published, but some are not very important. So you can content yourself with the news that is really important. Even sometimes, those that are a priori important generate little movement in the market. Nevertheless, do not trust yourself.
It is very popular to read or hear some traders say that they are trading forex with news. What they are looking for is high volatility to make a lot of money in a very short time. Attention, the message seems very beautiful, but the reality is quite different. High risk is also something to calibrate well.
Whether you are doing technical analysis or fundamental analysis , the economic calendar is really important. You might be thinking that since you do technical analysis, you don't care about all that macroeconomic news stuff. You can really do part of it, but to follow the market you have to stay present, otherwise you might get upset. For example, if you are in a fairly large position on the British pound and there is news regarding the UK Brexit referendum, this might upset you.
If you focus or are focused on fundamental analysis to make buy and sell decisions, you will know how important it is to follow the macroeconomic calendar and you will use economic data as a source to make your decisions.
You may be wondering if this calendar is only for the Forex market or if it has any use in the case of trading indices or commodities. Macroeconomic data from China, without going any further, moves most global indices. Events in the United States are causing major markets, including European indices, to be affected both positively and negatively.
Another example is oil, which in turn has a direct relationship in certain currency pairs due to the countries where it is traded and where there are large reserves. The publication of oil inventories is a very important piece of data which is taken into account by investors and traders. Ultimately, they affect the asset or country in question, directly or indirectly, and it is important to control its publication so as not to be caught off guard.