Forex Basics: How To Use An Economic Calendar

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Takeaway: The challenge with having the "ready made" calendar for economic releases is learning which events affect your trades and how much.

Forex Basics: How To Use An Economic Calendar
Source: Flickr/cursedthing

In many ways, forex trading has become much, much easier than ever before. Traders rarely call in trades or manually calculate position sizes anymore unless they really want to. Although technical traders have seen the biggest changes in how technology impacts their trading, fundamental traders have also benefited in the information age. Perhaps the biggest change for fundamental traders is that it is no longer necessary to create your own economic calendar for the pairs you trade. In this article, we’ll look at how to put these readily available calendars to work in your trading plan.

Scheduled Events Affect Currencies

The forex market is driven by data. On a short-term timeframe, the most significant data is usually technical in nature - a recognizable pattern forms, support or resistance levels are breached and so on. It follows then, that the primary driver in the long term tends to be the fundamental data.

Fundamental data can be unexpected, like a news event or natural disaster, but the vast majority is made up of economic releases that are made public on a set schedule. As mentioned, it is easy to find out when economic releases are going to be made. Many brokers offer a reliable economic calendar as part of their services, or you can find free ones on a number of web sites.

Picking the Important Events

For most of the majors, there is a well-known short list - the forex trader’s version of a Cole’s notes - to pay attention to. Almost all majors see major movement around exceeding or falling short of expectations on GDP, CPI, trade balance and unemployment. Then come more specific releases such as the Tankan report (Japan), U.S. non-farm payroll and so on.

Digging Deeper

For many traders, these well-known releases are all they’ll ever need. If however, you want to get fundamental data - or at least a good idea of what the data will be - before the crowd, a wider range of events need to be on your calendar. Although surprises do happen, the minutes from economic committees, monthly governmental finance meetings and the like offer the best hints as to what the eventual numbers will be.

In fact, the number of traders following these meetings has become large enough that the release of the minutes can have a noticeable market impact in the short-term, priming the market for the expected long-term trend once the final numbers are made public. Again, the timing of these meetings and committees are publicly available - and usually included on any economic calendar worth its salt.

Making It Your Own

The challenge with having the ready made calendar for economic releases is learning which events affect your trades and how much. Many fundamental traders learned how to use economic calendars by creating them, omitting minor releases and adding releases based on trading experiences. That much hasn’t changed. The work of compiling the calendar has been done, but it is up to the currency trader to narrow the list down to the ones that are significant to his or her trades.

If your position requires close monitoring, then it makes sense to scour meeting minutes as soon as they are released. If you’re playing a general theme, then the final numbers on major releases will likely suffice. Like everything in forex trading, how you use the data depends heavily on your trading plan and the strategy you are using within it. (For more on time frames, check out Forex Trading: How To Choose Your Timeframe.)


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About Andrew Beattie
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Andrew Beattie has spent most of his career writing, editing and managing financial content as well as more general web site material in all its many forms. He is especially interested in the future of search and the application of analytics to the business world. He has been a long-time contributor to Investopedia.com and is currently venturing forth on ForexDictionary.
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