Forex Trading Education – How to trade the Forex news calendar

Some of the best opportunities in trading are created through deviations in economic data, surprise actions by central banks, or even unexpected comments from central bank members. It is for this reason an economic Forex news calendar is one of the most useful tools a trader can have at their disposal.

An economic calendar is essentially a table of upcoming events such as economic data releases, planned speeches from central bank members, and planned meetings and announcements from organizations and bodies such as central bank meetings, G7 meetings, OPEC meetings and many others. By being aware of when events are due to take place, a trader is able to plan in advance of the event and be completely prepared for any trading opportunity which may arise.

At its minimal, an economic calendar should consist of the country the event relates to, the time and day the event is due to take place, the significance of the event (impact), the previous outcome of that event, and the expected outcome this time round for the event. Most economic calendars will also contain additional information such as a description and basic information about the event, with premium calendars also containing information such as the range of economists expectations and instantly updates upon the events release.

Despite the many events which are contained within an economic calendar only a select few of the events actually provide tradable opportunities, being able to determine which events are ‘market moving’ is critical to successfully trading risk events off of the economic calendar.

Which data to trade

How market moving an event is will be determined by several factors. The first being how significant the event is to the market, central bank, or economy. As a general rule although not strictly the case, high impact/tier 1 data releases are the most market moving events. Any event listed as low impact/tier 3 or medium impact/tier 2 is unlikely to be a tradable event.

The second factor to consider is how frequently does the event take place. An event which takes place weekly will generally have little impact if any, whilst those which take place only a handful of times each year have a much greater capacity to move markets. Most events take place once a month to once every six weeks.

The final and arguably most important factor is whether the event is likely to influence a central banks monetary policy. With the mandate for most central banks being inflation and employment, inflation data releases such as CPI and employment data releases such as NFP in the US make for some of the most market moving events for this very reason. Anything a central bank specifically mentions as a requirement to raise rates, or mentions as a risk which may lead to cutting rates, will almost certainly be a focal point for the market and a tradable opportunity.

Generally speaking most weeks will contain between 2 and 4 market moving events, however some weeks will contain none, whilst others contain several events almost every day. These events can provide high conviction trading opportunities which can go a long way in improving a trader’s performance and growth.

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