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How to Use the Economic Calendar to Increase Profitability
A successful trader requires both, the traits of a market fighter and a keen trade analysis, which requires authentic market news. There is nothing more important for an analysis than continuous up-to-date news. And one of the best ways to grab this news is through the economic calendar of the forex market that allows the trader to collect all the important global financial news and all the up-to-date info, about the finance at the time of its publication.
The economic calendar also ranks the news in the order of importance and capacity of its influence on the market – for the ease of the traders. The economic calendar acts as a helpful guide for the trader on his road to profit. Forecasts and economic history are also taken into account. The economic calendar is published online, right before the opening of the trading week, and its data plan is constantly adjusted in accordance with the current situation.
The use of economic calendar for trading involves at least the following three meanings of the announced economic events:
1. The actual event
2. The consensus (forecast/prediction)
3. The previous meaning.
In case, the forecast by the calendar is justified i.e. It is in accordance with the calculated values, and then the market reaction will often be small or be completely absent.
But if the actual data does not coincide with the forecast, the market in result gives a sharp reaction with a speculative peak. The strength and the degree of this reaction depend upon the difference. The greater it is, the greater is the reaction.
Global events including international breaking news, statements and press conferences in regard to the financial markets and the financial and economic statistics of the major countries provide an important response practically on all the aspects of trading and hence, they form an important part of the news by the economic calendar.
In case when the news comes out to be better than expected (for a country’s currency output), A buy order is recommended, where as in the case of a downfall the sale of one is. And if your’s is the rare case and values match, then stay neutral, relax and keep unbiased trading.
The economic calendar provides the trader an opportunity to know the time of the news beforehand which helps him to plan his activities, specifically the plan of entering the market or closing his position.
The market starts to respond to the information in advance owing to the principle of “know the rumor, sell the news” due to which people start making market moves early, by vividly anticipating the flow of the market but at the time of publication one may go in the opposite direction, forming a sharp market “spike”. Everything happens quickly and the situation can be extremely dangerous. To save one from such an inconvenience an Economic calendar warns in advance, the time of the news release, that allows the trader to close the already opened positions in time or, to squeeze a profit from a quick movement depending upon the situation.
Economic calendar is offered by every financial resource, and comes with different design, and sometimes even with different functional content, but there are characteristics to precisely indicate a quality calendar:
1. The Forex calendar must be complete and constantly updated, in order to have direct access to news sources and also a move at the trading opportunities.
2. A completely understandable interface.
3. It must support a logical system of resources for information.
Understand what the news means for the market in general and for your trading strategy specifically and always analyze the historical data, the psychology of the market and behavior of the crowd at the time of the news release and by doing this, the economic calendar will become your guide to success.