Forex economic calendar, how to trade with the Forex calendar | Litefinance (2024)

The economic calendar is the main tool used in fundamental analysis. This is the list of major forex economic events that can influence foreign exchange rates. Read on about the important economic events that traders track, how they influence foreign exchange rates, and how you can make money trading the news.

What is Economic Calendar?

Forex economic calendar contains information about the upcoming publication of important fundamental news, reports or the officials’ speeches, which can affect currency or stock markets. It includes monthly, quarterly and annual statistic figures on a country’s financial variabilities and indicators such as budget, payment balance, discount rate as well as the information on commodity and financial markets, and the attitude of the central banks to the monetary policy.

Advantages of the economic calendar:

• It informs you about when (date and time) and in which country fundamental news will be released. It is an individual trader’s decision on how to interpret and use the news.
• Due to the calendar, a trader is informed about when and in which country a national holiday is celebrated, which is a bank holiday.
• It ranks fundamental news according to their importance, showing an analytical forecast of the report.
• After the news has been released and the market has reacted, it helps to analyze the impact of the fundamental factor on investors’ opinion.

Ways to use the economic calendar in Forex trading

Fundamental analysis suggests forex trading based on economic data releases. Macroeconomic and sectoral statistics, economic indicators, central banks’ statements, other economic reports are the factors that can radically change the market sentiment, and so, it influences the forex rates, commodities or securities. Traders like fundamental analysis and the forex fundamental announcements calendar because it, unlike technical analysis, doesn’t require deep knowledge of technical indicators. So, news trading is suitable for all investors. The major tool of “fundamental” trader is the economic calendar, whose strong sides are covered in this review.

Practical application of FX economic calendar

The economic fx calendar is the list of upcoming events (calendar of events) grouped by countries, importance (the strongest impact on forex rates), and so on. An event, scheduled in the daily economic calendar, which goes on in a country directly influences its local currency and market conditions.

The most important events in the USA that affect the value of assets:

• Fed’s decision on the federal funds rate changes (frequency: 1-3 times a year). It influences investors’ interest in the US currency. An interest rate hike results in the growth of the USD value relative to other currencies.
• Nonfarm payrolls (monthly US jobs report). You can learn how this report affects foreign exchange rates and how to make money using nonfarm payrolls here.
• Reports on crude oil production and the number of oil rigs (published monthly). They have a short-term effect on oil futures. If oil production declines, the demand usually increases. If the number of operating oil rigs contracts, the supply will reduce. In both cases, oil prices increase.

Other important events that influence Forex rates:

• ECB’s monetary policy decisions. It determines the future policy concerning inflation, issuance of bonds, volumes of money supply, interest, and deposit rates.
• Macroeconomic statistics. It covers the balance of payments, GDP rate and industrial production, inflation rate, price indexes, and other economic data. It affects the value of the local currency versus the US dollar.

The above examples are only a part of the cases that represent the relation of the forex rates to a wide range of economic events.

Example of a forex news trading strategy. Make money on the forex market when BoE Governor Carney speaks

Select the current date (for, example, 09.01.2020) in the economic calendar and enter the event importance (choose the high priority). On the given date, there are only two events of high priority: the governors of the BoE and the BoC speak. Select your time zone in the fx forex calendar (for example, for GMT+2, the speech starts at 11.30 local time).

Let’s try to make profits from the first event, the speech of the BoE governor Mark Carney. Open the GBP/USD trading chart and analyze the hourly chart in real-time.

Over the past 10 days, the price chart has formed a Triangle pattern. This means that the price can break out the upper or the lower border of the pattern at any time. The BoE governor’s speech is likely to trigger the breakout (filter all the important news for the current week in the UK filter, and you will see that, apart from this speech, there no more news events particularly significant).

Set the M5 timeframe for the GBP/USD pair on MT4. And wait until 11.30. As a risk warning, I’d like to note that it carries a high level of risk to enter a trade during the first minute, as the majority’s opinion has not yet formed and the initial direction can be false. Hold the position open for about 30 minutes (the price can work out some most important events in a few hours), but, if the trend is exhausting (smaller candlestick bodies, candlestick in the opposite direction), exit the trade earlier.

Mark Carney has signalled that the Bank of England is willing to lower the interest rate from 0.75% to 0.5% if the weakness of the UK economy continues, gave a general market commentary. This has strengthened the pound against the US dollar allowing it to hit its two-week low. One could have earned about 40 points on this new over 30 minutes.

Note that you don’t have to listen to the speech of the Bank of England governor (although it is useful). It is enough to follow the trend, that is the opinion of the majority. However, there is a risk to enter a little late. So, I still recommend reading the news or listening to direct speech, to pick up the start of the new trend early and start trading.

A few tips to traders trading based on the fundamental analysis:

• You should always compare the current data with the forecast. If the report is positive but worse than the forecast, the asset price will go down.
• Be careful with the filters. If you choose only the USA in the filter, you can miss the data on the euro-area economy. And it can make a strong influence on the market.
• You should fully understand the potential impact of the news. Bear in mind that if the event is expected and predictable, the price may not change when the event occurs, as it has been already priced. For example, a relatively predictable change in the Fed’s interest rate will have a little impact on the U.S. dollar rate at the moment of the decision.

A practical example of using Forex strategy based on the economic calendar

Important! A lot of sites recommend the strategy of Forex trade based on the economic calendar as an optimal one for beginners. It is emphasized that it is rather easy to take profit from news due to the volatility wave. But it is here where the possible pitfalls are. In fact, professionals advise the beginners not to trade during 30 minutes before and after fundamental news release because of the growing volatility and slippages.

The description of the Forex strategy based on the economic calendar will be the most precise if we take into account the most important news. The example of such important news affecting investors opinions is Nonfarm Payrolls. This report, being the second important after Federal Funds Rate, reflects employment statistics changes in the non-agricultural sphere. The report is released on the first Friday of every month at 8.30 US time zone. The strongest market reaction lasts for about 30-60 minutes.

Important! During several first minutes after the report has been published Forex charts can move chaotically in different directions. It is important to have enough deposit and long Stop Loss (the strategy is not for the faint hearted) to wait until the main direction of the trend is clear. The main trend starts in most cases when the actual value of the indicator deviates from the predicted by more than 40 thousand.

Here “actual” is the actual value of the indicator, published after the release of the report (as you see, for August there has been no data yet). “predicted ” is expected value, and “Previous” is previous value. In August the value hasn’t been corrected yet. (209 K)

A vivid example of a successful strategy is the report published on 05.05.17, where due to positive data having coincided with the predicted ones, dollar rate in Forex online rose.

There is one more interesting description of Forex strategy which is based on the argument that reports like Nonfarm anyway lead to the intensive changing of the trend. 5 minutes before the news release we open two equal opposite positions hedging the risks. Monitor the USD rate at the moment of the news release and after the start of a strong trend close to the loss-making making position. The loss pays off with strong growth. The profitable position should be closed after reaching the target level (in 20-40-60) minutes or when a reversal pattern appears (Pin Bar, etc.)

Similarly one can trade on other reports. Before testing the strategy on a Demo- or a cent accounts I recommend to analyze Forex charts for the last year to see how the investors react to the news publication and what factors prove to have a stronger impact than statistical data.

The pitfalls of the trading strategy based on Forex economic calendar

• The typical beginners’ mistake is to think that in the case of a positive report the quotations will shift to an upward trend. Actually, investors made their forecast long ago having invested their money. And if the actual report being even better in comparison to the that of the previous period turns to be worse than expected, the asset’s quotations will descend.
• The fundamental news should be analysed only in conjunction with the other news. For example, two news items about one currency pair USD/EUR are released simultaneously: the main one ( about credit rating in the USA) and the second one from the Central Bank. The rate growth is expected to raise the dollar price, but this doesn’t happen. The reason is that the rise is already included in the current quotation of the dollar, while the news about EU monetary policy was a surprise for investors.
• At the moment of the news release, there is increased volatility and slippage. In other words, everyone wants to buy an asset but no one wants to sell it. That is why the orders trigger with a delay and not by the price the trader expected.

Conclusion.The economic calendar can be a strategy itself but I would classify it as a trading tactic with high-risk level. My recommendations:

• When working with fundamental analysis one needs to analyze reversal patterns of the graphical analysis (pin bar, head and shoulders, rising wedge) and define the targets precisely, that means the support and resistance levels.
• Trading on news releases does not always prove to be profitable, as a trader can miss something important. Technical instruments need to be used (oscillators, trend indicators) and to observe the predictions.
• It is better not to chase unlimited profit. Having reached the target level it is better to close the positions and use a trailing stop.
• It would be effective to make a simple table in Excel with the calculations of the levels Margin Call and Stop Out. The understanding of the total lot volume, terms and conditions of the broker’s offer, the credit shoulder size the volatility level will help to calculate the limit quotations value for your deposit or position volume.
• The maximum volume of opened positions shouldn’t be more than 15-20% of the deposit.
• You should believe in yourself, practise on demo and cent accounts, gaining experience, and not be afraid of taking a risk.

Are you interested in trading an instrument? Open the demo account, run the economic calendar, and learn to make money. If you are interested in the mobile version of the economic calendar, I recommend following this link. If you have any questions, feel free to ask in the comments. Let study new forex instruments together! I wish you success in trading!

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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.