Why is Using an Economic Calendar Important for Investors?

economic calendarAs an investor, one of the most important tools at your disposal is an Economic Calendar, and by looking at it every day, you can become more successful and more profitable as a trader. An economic calendar is a schedule of data releases and news events which relate to the financial markets and the economy of the world in general, including information about interest rate decisions, GDP data and Non-Farm Payroll numbers. Economic data is released frequently, sometimes on a daily basis and on several occasions through the week, and all of these events can be found listed on an Economic Calendar which will also outline the scheduled time at which the release will be made. Events are graded on most Economic Calendars with those that are considered to have a minimal impact on the market, being marked as “Low” while those with more importance being marked “Medium”, often with a yellow star or dot, and the most significant releases being marked as “High” impact together with a red dot or star. When participating in market trading, traders who use economic calendars are better able to understand why markets are moving in a particular direction and are better able to anticipate future moves. Although it is not always possible to correctly predict the market’s reaction to economic announcements, these data releases represent a strong trading opportunity and by using an economic calendar, an investor will know when to check the financial news in order to potentially capitalise on the market trends.

Volatility in the Markets due to High Impact News Releases

Although being aware of all economic events is important for serious traders, the ones that are most vital are those marked “High Impact”. Around the time of these data releases, there will always be strong volatility in the markets and this will result in some traders cancelling their orders while liquidity may drop triggering instability in asset prices before a final direction is decided. In order to limit risk, investors can check their economic calendar on a daily basis before commencing trading. This means that they will be aware if the market is likely to become volatile and can then decide whether to avoid trading during this period or to attempt to increase their profits by taking advantage of market volatility. Usually, when market conditions are normal, an investor can be aware of their risk on every trade, however in the event of a high impact data release, it is possible for things to change drastically, with an increased chance of worse than expected prices. When a trader is aware that the market may be unpredictable, they can close out their position a short time before the news release and avoid entering into a new trade until after the data is known, thus limiting the high risk of loss.


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How to Use an Economic Calendar

Economic calendars are found for free on many websites. They show clearly the time at which economic news will be released, which currency will be affected, how the currency is likely to move, the data release’s importance and the release’s history. This information allows the trader to plot a chart and to identify the possible bottoms and tops of a trend. Online economic calendars generally incorporate numerous vital indicators which are regularly updated to help traders to make an informed trade. These include:

Reasons to use an Economic Calendar

To become a successful trader, you need to be aware of news, market trends and global events and using an economic calendar is the best way to obtain this information at a glance. Having this kind of information in advance allows you to predict the direction of the market, and an awareness of the factors which can affect the market will give you a better chance of making a profit. To be effective when trading, it is vital to consider the bigger picture of all of the political and economic factors that can influence the market, and an economic calendar supplies the investor with all of the important aspects that need to be borne in mind. Although it is not always possible to correctly predict the effect of these economic indicators on market prices, having a clue about how the market could generally be expected to react is of significant value and helps the investor to make an informed trading decision.

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