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Every trader and investor, whether a novice who speculates on a personal account or an operator trading as a member of an institutional trading network (institutional operators), depends on the Economic News Calendar, also known as the Calendar of Economic Events. A financial market's trading environment is impacted by important events that are displayed on an economic calendar.
There are various announcements that are issued on a regular basis in financial markets like Forex that highlight significant sociopolitical and economic developments. These statements, which originate from governmental organizations, central banks, private organizations, lobbyists, and others, can occasionally act as a foundation for economic policies and as a guide for tactical changes in the commercial and political landscape.
For instance, the beginning of the global financial crisis prompted governments all over the world to react politically in line with how the events from 2008 to 2010 affected their nations and governments. The sovereign debt crisis in the eurozone has accelerated political transitions and the adoption of economic measures. We witnessed the creation of the Asset Rescue Program in Trouble (TARP), many significant bailouts, and the Federal Reserve Bank's loosening of monetary policy in the United States. Many of these choices were made all around the world, altering the economic news calendar as we know it for all time.
Due to the current state of globalization, these announcements have a direct impact on the international economy and have a significant impact on how we live our lives and how future events will affect our future. Financial market participants have had to learn how these announcements impact the investment climate in a nation, a region, or on the global stage. Depending on the tone and content of these economic announcements, a currency, market, or economy may develop positively or negatively. Due to the resulting volatility, this in turn influences how investors behave in various markets. Market news refers to these advertisements.
Market news is not released at random but rather follows a well organized month-to-month calendar over the course of a complete year. The economic calendar is this program for publishing economic news. Because the majority of the news it displays has an immediate and direct influence on the currency market (and occasionally a longer-lasting one), it is often referred to as the Forex calendar or Forex news calendar by forex traders. The economic calendar does influence all markets, albeit to varying degrees.
Components of the Economic Calendar
The Economic Calendar's elements
What materials make up the Economic News Calendar? What should traders take into account about this tool? The specific elements of the Economic Calendar are described in full below:
The day and time when each item of economic news that is listed in the calendar will be published. In this instance, the operator can plainly see the precise release time of the news, which by default is displayed in Eastern United States time. With the aid of some technologies, users of some economic calendars can adjust the time settings to their local time. Eastern time in the United States is the international time reference, nevertheless. Therefore, in order to know the times of day when it needs to be alert to the markets, the operator needs to know how far its own time zone is from the Eastern Time Zone of the United States.
the actual economic news. The trader should logically be aware of the economic news that will be released and operate in accordance with it.
Here is a lovely film about economic calendars made by Trading 212.
The currency of the nation from whence each news item originated in the case of forex. Due to the fact that this currency is frequently impacted by news, traders will be watching the relevant currency pairings to determine which ones offer the best trading chances. Typically, either the flag of the nation whose currency is affected or the ISO acronym of the currency will be visible.
the extent to which the news's dissemination affected the market. The degree of market volatility and the breadth of price fluctuations provide an indicator of how powerful the impact of the news can be on the markets. Economic news is divided into low-impact (green), medium-impact (amber), and high-impact (red) categories on an economic calendar. Some calendars utilize the color codes adjacent to the news, while others use stars (*) to denote the market impact, with the news with the greatest market impact receiving a 5-star rating (*****) and the news with the least market impact receiving two stars or even one star.
Some vendors of economic calendars will show a «Detail» box. Operators can go here for further details on a specific news story as well as the market impact in the event that the numbers are higher or lower than predicted.
Economic calendars typically display each economic news item's historical value, expected value, current value, and amended value. This is where traders can find out the benchmarks for each data point as well as the actual news numbers as they come in. For comparative analysis, some suppliers offer a historical chart or template that illustrates how a specific story has performed over the past few months or years.
Calendars of Economic News Sources
On almost all of the top Forex brokers' websites, you may download the economic calendar for free. There are additional outside suppliers that may be helpful. To discover a reliable economic calendar that delivers comprehensive and current information, it is the responsibility of each trader to explore the websites of Forex brokers, online market analysis sites, market-related online forums, and analysis service providers. Different economic calendar suppliers can include specific features to enhance the appeal of their calendar versions. The hours and dates at which each news item was published are unaffected by this.
How may the economic calendar be used?
It is crucial to comprehend how to use the economic calendar properly now that we are aware of what it contains. Although there aren't any firm guidelines for using economic calendars, here is a guidance on how to use this tool to trade in markets like Forex.
Rule 1: Always spend a block of time allotted to it studying the news program on the economic calendar. Do this for the month ahead of time. This is done in order for the trader to keep track of the days and times that the high-impact news is slated to be released, as well as when it will be released. This gives you the opportunity to arrange your operations appropriately so that you don't have any open positions that could be badly impacted by the news's publication, either by erasing their gains or considerably boosting the unrealized losses of losing trades. It is astounding how many traders choose to disregard this obvious reality at their own peril.
Rule 2: To determine the time difference between the local time and the time displayed in the economic calendar, use the world time tools (showing the current time in any time zone) available in search engines. You can then modify your time settings as necessary. By doing this, you'll be able to avoid missing out on important business possibilities.
Rule 3: Analyze past data to see how a certain story impacts markets. The best course of action may be to examine your prior behavior using historical data and graphs if you want to predict how a currency pair or index will respond to the release of a specific economic news item (as an important economic indicator). This will stop a trader from establishing a profit target of, say, 100 pip for a story that, for instance, will only move the market by about 50 pip. Knowing whether a specific economic news item is unstable will also be useful.
Rule 4: It is advised to limit trading to high-impact news because it is these events that move markets and produce the necessary volatility to produce profitable trading chances. Low-impact economic news only produces small-scale fluctuations, which makes it unsuitable for high-profit markets where volatility is required.
Use calendars with automatic update features that update the calendar with the most recent data as soon as the news is published (rule 5). This will enable you to carefully watch on your operations.
Conclusion
In essence, we can say that an economic calendar is a crucial trading tool for all financial markets. To ensure that operators get the most out of the information it offers, it must be used completely and correctly. To obtain what they need out of an economic calendar, an operator may occasionally need to combine two or three of them since some may offer extra benefits while having drawbacks in other areas.
Planning is the cornerstone of trading. The trader can arrange his activities so that he avoids getting caught in some of the surprises that may occur during economic news publishes by having a thorough understanding of the economic calendar well in advance.
Also keep in mind that the market is always changing. Due to the advent of new industries that are now the main drivers of the global economy, certain economic news that had a minimal impact on markets a few years ago has increased in importance and impact. American housing statistics is one example of this. Some housing sector indicators weren't very significant prior to 2006, but as the subprime mortgage crisis was revealed to be the primary driver of the global financial crisis, US housing data became a closely watched economic news story.
Last but not least, the trader should be conscious of adding new economic news and eliminating ones that are obsolete or even outdated. Some of this news may have a significant influence, such as the JOLTS employment report from the US, which was developed in the labor market.