Good strategies and analytical techniques do not always make a profit for experienced traders. The experienced traders always pay attention to the economic calendar before trading.
What is the economic calendar?
It is a calendar that lists important economic events and announcements that will take place. Through this calendar, you can find out when important data and information about the economy will be released. Important economic data recorded in it generally includes GDP (Gross Domestic Product) data, central bank interest rate decisions, employment data and the number of unemployed in a country. Each announcement is usually marked by the impact that might occur on economic movements.
Impact of the Economic Calendar on the Forex Market
Price movements in the forex market are very much influenced by various kinds of issues, events, and ongoing economic conditions. Thus, studying the economic calendar can give you an idea when a decision will be able to bring changes to market conditions.
For example, you see that the latest announcement on the central bank’s economic data will be released in just one more week. You can conclude that the market will move volatile on that date. This is a form of market reaction to the economic uncertainty that is emerging.
Many traders avoid these uncertainties by closing their positions or taking steps to place a position right when the announcement is released. This condition will make you have to be more careful in analyzing the potential benefits that might arise.
According to The Balance, you should check your economic calendar each morning before you start trading, and jot down the times of the major data releases.
Utilizing the Economic Calendar in Trading
By knowing the impact, you can design specific trading strategies that are suitable for the conditions you will face.
For example, you are waiting for the latest benchmark interest rate announcement. Then, you can do research and analysis to find out about the benchmark rate.
By doing such anticipation, you can find out the best opportunity to enter and open the right position. In turn, this will increase your potential for profit in forex trading.
Read more: Index Trading and Index Investment, What’s the Difference?
