The world’s financial markets represent a diverse and deceptively complex space, with the foreign exchange alone reporting an estimated daily trading volume of $6.6 trillion.
To navigate such lucrative and busy markets, traders can use an entire suite of analytical tools available through their chosen brokerage site, including economic calendars. Platforms such as the MT5 integrate economic calendars seamlessly into their interface, making them easy to use on a daily basis.
But what exactly is an economic calendar, and how can you leverage the information that it includes to your advantage?
What is an Economic Calendar?
As the name suggests, the economic calendar refers to the scheduled dates of upcoming data releases or significant events that are likely to influence individual security prices or marketplaces.
Typically, they focus on the scheduled releases of economic reports for individual countries, with common events including national jobless claims and domestic monetary policies such as the regulation of the base interest rate.
Most events listed on the economic calendar fall into one of two categories; namely projections of future financial or economic events and reports on instances that have already occurred.
It’s also possible to organise your own economic calendar depending on your current portfolio and circumstances, which should also determine the precise range of economic and non-economic indicators that you use.
These metrics offer a unique insight into the subsequent impact on specific markets, while an economic calendar may also display the trajectory of these markets prior to the event or data release.
On a fundamental level, you can adjust your calendar to display information and events on a daily, weekly or monthly basis, depending on your unique trading strategy and how frequently you execute orders online.
Each entry will also include a brief description of the event and its potential influence on the marketplace, while you can isolate specific assets to see how they’re likely to be impacted over time.
What Information is Relevant to You?
Ultimately, you’ll need to determine which information is most relevant to you, based on your precise trading strategy and underlying risk profile.
To this end, it’s important to note that you can customize your own economic calendar, from the precise events and data releases that you target to the time frame during which you evaluate information.
For example, if you frequently trade the US dollar, you may want to customize your own calendar around the events and data releases that are scheduled within a relevant time frame. What’s more, you can use a calendar to determine which events are likely to have the biggest impact, before basing your trades on the insight provided.
In terms of interpretation, perhaps the best way to use an economic calendar is to access a week’s forward view of scheduled events and releases, with this offering a clear and focused insight into the most affected currencies and the likely level of influence.
Remember, economic calendars also deploy variably colored flags and wording to indicate each event’s importance, so you can use this to prioritize information and utilize this accordingly.
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