An economic calendar is a resource that allows traders to learn about upcoming news events.
If you are involved with the financial markets, you must have come across the term economic calendar several times, especially when doing your fundamental market analysis. The economic calendar refers to the scheduled dates of important events or news releases that may affect the price movement of individual assets or markets as a whole.
The events listed in the calendar fall into two categories: reports of past economic or financial events, or projects of future financial or economic events. These events help traders and investors in planning trades and portfolio reallocations as well as staying alert for chart patterns that may be caused by the events.
You can find an economic calendar for any financial instrument that you are involved in. There is an economic calendar for Forex, an economic calendar for cryptocurrencies, and an economic calendar for stocks.
Most financial and market websites also allow users to select economic calendars tailored to their geographical location in terms of timelines. For example, if you are a trader from the UK you can look for the economic calendar UK whose timeframe will be in the UK time zone.
Economic calendars are available for free from economic and financial websites. One of the most commonly used economic calendars is the myfxbook economic calendar.
Economic calendars normally focus on scheduled releases of economic reports from different countries. Some of the common releases you will find in the calendar include weekly jobless claims, changes in interest rates, regular reports from central banks including the Federal Reserve in the US, reports of new home starts, and economic sentiment surveys from specific markets among others.
So how do you read the economic calendar? To start with, the calendar helps you gather market information that will assist you in identifying trading opportunities. The scheduled events on the calendar inform the type of position you should open on a particular financial instrument and also determines if you should close a previously opened position.
If you are trading Forex for example, and the calendar shows there is a scheduled release that will affect the price movement of a particular currency, you should confirm whether the anticipated price movement is in line with any open position on any of the currency pairs constituting the affected currency. If the news affects the EUR, for example, you should confirm any position on EUR pairs that you have open. If the positions are not in line with the release, then the wisest thing is to close them to avoid huge losses since markets get extremely volatile during such releases.
If the positions are in line with the anticipated market movements, you can leave the positions open but put some risk management like ‘take profit’ and ‘stop loss’ into place. You can also decide to open a new position speculating on the market movement after the news.