Nobody ever said that financial trading was easy, although the level of difficulty, risk and volatility varies from one marketplace to another.
Regardless of which market or asset class you trade, however, you’ll need to utilise a wide range of tools and technical indicators if you’re to make informed decisions and achieve viable success over time.
In this post, we’ll look at the role that economic calendars can play in informing your individual trades, while asking how you can use this type of tool to your advantage as an investor?
What Markets Can be Researched Using Economic Calendars?
In truth, you can trade and research a vast array of markets using the economic calendar, although the type of calendar that you utilise and your precise methodology will vary depending on your preferred asset class (we’ll have a little more on this later).
More specifically, markets that are the most vulnerable to geopolitical and macroeconomic developments offer the best value from the perspective of economic calendars, as the latter features both scheduled news events and data releases pertaining to everything from international trade deals to base interest rate movements.
In this respect, the forex and stock markets are relatively easy to research and organise using an economic calendar, as you can strive to forecast price movements and execute trades based on likely developments.
Arguably, economic calendars also offer considerable value to day traders who operate in these spaces, particularly those that deal primarily in currency pairs and forex trades.
The reason for this is simple; as day traders profit directly move sudden and short-term price movements in derivative markets, so they can use the data featured in an economic calendar to identify prominent peaks and troughs ahead of time.
What Information is Included in an Economic Calendar?
As you can imagine, traders are able to follow key economic and non-economic indicators through this type of calendar, each of which offer an insight into the direction of their chosen market and the likely impact of specific events and data releases.
On a more fundamental level, you can also organise your calendar to show events on a daily, weekly or monthly basis, which each entry is ranked according to its importance and potential influence on the financial markets.
The calendar will also include a brief description of the development and the estimated time of its release (in the event of economic data and monetary policy details), helping you to inform your trades in real-time and manage your capital more effectively.
You’ll also be able to determine which currencies or assets will be directly affected by the event in question, while the actual impact on the market will also be recorded for prosperity over time.
How Should This Information be Used and Interpreted?
Perhaps the best way to view an economic calendar is to access a week’s forward view of scheduled events and releases, with this helping to provide a clear insight into the affected currencies and the forecast relating to the expected outcome.
In terms of understanding the extent of each event’s impact on a specific market or asset, this is displayed using different coloured flags and variable wording.
More specifically, a pale blue flag indicates ‘low’ importance, which may be attributed to data releases such as business confidence and sentiment. An orange ‘medium’ flag is next on the spectrum, with this often applied to more seminal data releases such as consumer confidence figures in major economies.
Unsurprisingly, high importance events are represented by a striking red flag, which will often accompany data releases such as central bank base rate decisions (particularly in regions such as the UK and the EU). These data releases have the biggest impact on currency prices, primarily because they impact directly on capital inflows and the demand for certain assets.
On a final note, you’ll need to understand that the impact and forecast for related to specific events is variable, so you should consider these metrics alongside your own knowledge, insight and understanding.