Reading the economic calendar for improved forex trading

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Updated: 05 May 2020

When you learn how to trade CFDs, cryptocurrencies or any chosen market, certain skills require careful study. Naturally, the same applies to forex trading. One of the more useful skills is the ability to read the economic calendar. By analyzing news events and releases, forex traders can monitor market conditions and predict potential fluctuations surrounding key events. As a whole, this forms part of a forex trading strategy and can be highly beneficial for mapping market volatility.

Finding a calendar

Many trading brokers, websites and platforms provide their own economic calendars, allowing for ample resources for staying on top of the latest upcoming economic news. Most of these calendars are similar and have automatic updates, are easy to read, and provide various features to make the analysis experience simpler.

Analyzing the calendar

The calendar will list the relevant events and data releases from around the world for each day. You can focus on a single day, or you can look at a series of weeks or months as a whole. The list consists of the time of day, currency affected, event and further details.

An example would be releases, such as the official bank rate, annual budget release, federal budget balance or asset purchase facility. A link next to this event or release will lead you to further information about the release, providing you with historical data and future forecasts of what the event may reveal. The calendar also provides information regarding the potential effects, how it will influence trades and other informative notes.

In the time leading up to the release, traders can analyze market graphs and charts that display previous numbers and movements of the specific release information. This reveals how this factor has moved in the past and indicates how it may potentially move in the hours that follow a new release. The available data even reveals previous predictions compared to what was actually achieved.

An additional function on these calendars, which should be noted with all forex trading advice, is the option to filter out certain events. These events are categorized as high impact, medium impact, low impact or no impact, depending on how they will influence the market. This allows you to remove news about currencies that are not relevant to your chosen forex pair. The function offers filters like country, relevance, inflation, event type and the impact levels. By eliminating these releases, you can focus solely on the information that is applicable to your currency pair.

The key function of the economic calendar is to inform traders about upcoming events that have the potential to influence their trades. Because data is released daily around the world, these events continue to impact market conditions, price action and other changes. The nature and numbers of these releases will determine whether price action is affected positively or negatively. Using the economic calendar will provide you with the necessary events, along with detailed information about past releases, to assist you with future market predictions. Based on these predictions, you will be informed regarding what trades you should or should not make based on the level of risk following an economic data release.

When reading the economic calendar, it is important to note that the news that is released related to your chosen currencies might not be the only relevant information. Reading the economic calendar requires a deeper knowledge of which countries’ developments can affect certain currencies. If you were to ignore releases from an influential country, it could be detrimental to your trades if large fluctuations occur as a result of the news. For this reason, you should analyze calendar events and data with a substantial amount of existing knowledge and understanding. As part of your trading strategy, using economic news to your advantage can prove beneficial in reducing losses and increasing gains.

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