Economic Calendar

What is Economic Calendar in Forex

An economic calendar is a tool that gathers dates when important economic reports/data will be released, & displays this information on your trading app so you plan your trading strategy properly.

Why Is Economic Calendar Important?

An economic calendar is an important tool for a forex trader because of the enormous effect the economic data releases can have on the price of a currency pair.

When you trade immediately after the release of important economic data like NFP, PCE, CPI etc. there is a tendency to make higher profits within a short time.

This is because after certain important economic data is released, volatility in the market spikes up so prices start changing speedily.

The prices could change so fast that they reach record highs/lows, break any existing resistance/support levels, etc. This creates an avenue for higher profits within a shorter time.

There is also a risk of making higher losses after economic data releases, if the market moves against you so you could use heightened risk management tools like a trailing stop loss.

When you know when the economic data is going to be released, it helps you prepare in advance.

Some traders fund their accounts in anticipation of data releases, some halt trading because they cannot risk trading in such volatile & unpredictable conditions, etc.

How To Read A Forex Economic Calendar

Step 1: Ensure The Date is Recent

First step to read a forex economic calendar is to check the date to be sure you are looking at events that have not yet occurred.

Many new traders make the mistake of looking at past events that have already happened because they don't check the date of events.

Step 2: Take Note of The Time of Release

Check the time in hours when the data is going to be released. This is important because even if you get the date right, but miss the exact hour the data is to be released; you will miss out on using the information to trade.

You need to be seated on your computer before the time so you can trade immediately the data is released.

You also need to be aware of time so you could suspend trading if you are not a fan of trading immediately after economic data releases because of the heightened volatility.

Step 3: Check For High Importance Data

Economic data that is very important and have the power to cause high volatility in the market are always marked with a symbol.

In our MTL economic calendar, we mark such news with an image of 4 full blue histogram bars.

However, other forex calendars can choose to mark such news using different warning signs such as red color.

Economic data releases of low importance are market with lesser number of blue histogram bars on our economic calendar.

When economic data is classified as less important, it means that in the past, its release has never had a significant impact on currency prices.

Economic data of high importance to forex traders such as CPI, will usually be classified as being of high importance.

On our MTL economic calendar CPI release date is marked with 4 blue histogram bars to indicate its high importance. Some other forex calendars may put a red sign beside CPI to show the danger/risk it carries if you are unprepared to trade it.

Step 4: Compare The Actual/Current Figure To The Expectation/Forecast

You should compare the current data figure with where economic experts are expecting or forecasting it to go.

Usually, if the newly released data looks better than the forecast then it is a good sign & you can expect to witness a lot of volatility in the market after its release.

For example if the forecasted CPI figure was 3% but the newly released CPI data showed that inflation fell from to 2%, then the exchange rate currency pairs like EUR/USD will begin to fall even faster on the charts.

This is because confidence in the US economy will grow causing more people to invest in the dollar hence it will strengthen.

But, if the newly released data is worse than the forecast, you may not witness a lot of volatility in the market after its release.

As a follow up to the previous example, if the newly released CPI data showed inflation fell to 3.5% (poorer than the forecast expectation of 3%) this will cause lesser confidence in the U.S. economy hence the exchange rate of pairs like the EUR/USD may not change much.

Step 5: Sort & Filter Out Low Importance Events

You can filter out the noise using the sort buttons on a forex economic calendar.

Some calendars let you sort by country, importance, etc. This helps you focus on the kind of data you want & eliminates the noise.