Many a times financial market moves are very closely linked to certain economic development or outcome and several traders try to cash in on the opportunity thus created. Be it stocks, currency or commodities, economic developments have a bearing on financial markets of all kind and more often than not we see the economic outcomes distinctly creating a specific trade opportunity. A calendar or document that keeps a tab on all predictable and scheduled economic announcements like interest rate policy or inflation rate or even monthly consumer trends is called an economic trader and is extensively used by traders who undertake news based trades.
Understanding An Economic Calendar
Therefore we can simply state that a calendar which can be used by traders to keep a track of economic events that determine market moves is called an Economic Calendar. It generally includes specific date and time of key economic announcements like payroll data, unemployment data, inflation rates, consumer spending trends and many such announcements which not only indicate the strength of a particular country’s economy but also signals the market sentiment or the general consensus on the immediate future.
Using this kind of a calendar enables a trader to not just keep track of an event but also fashion a trade that can help him take advantage of the expected move in the market. For example during the fragile economic period between 2012-2014, any news of a rate cut by the EU would send the market soaring higher. So if you were a trader who tracked the interest rate announcements and came across a consensus that interest rates would be cut 50 bps more, it is also most an immediate signal for boosting your positions and setting yourself up for significant gains soon after the announcement is made.
The best part is you do not need any special tool to make these economic calendars. Just a basic search on the internet will throw up myriad of sites with the info and even every stock exchange lists out the key developments and announcements expected in that country. For example the Nasdaq website lists all weekly economic data announcements in the US. Even some government sites like the EU website lists out all key rate action date and time and also time and date for all key economic announcements across the region. The best part is more often than not, even a somewhat brief analysis is also included so an average individual gets an idea of the general swing and outcome that is due.
How To Use An Economic Calendar?
Therefore in short an economic calendar in short an economic calendar helps you in :
- Find out the dates of market moving news
- Categorising event type an ddetermine the most important developments about to happen
- Gives a broad overview of any global markets and how trade is being affected there and associated markets
- Analysis of the market moves and preparing for future volatility
So the next question is now that we know how to get this economic calendar and what it comprises of, the point is how can you use it effectively to gain from an expected news and in what way can it boost the returns from your trading positions and overall trading strategy after incorporating this additional knowledge?
- Set The Time: It is not always necessary that news developments in only your country affect your market. Many a times global markets have a significant bearing. Prior knowledge will help you keep a watch and keep vigil.
- Daily Checking: Make sure you go through the calendar on a regular basis. As not only will enable you to remain abreast about the developments but also track in potential change in policy stance that might be changed
- Analyse Carefully: Economic calendar has many types of data. While the auto sales will show a MoM or month on month trend change, the infkation and consumer spending data has a WoW or w eek on week data representation. These differences are very important for a more accurate and pointed analysis.
- The Right Picture: Your analysis is not complete without an understanding of the broad trend. When you click on the basic data link you will also get an idea of how it was in the previous time period and what is expected in the following time period. This trend often enables a trader to take a more comprehensive call on the market.
The bottomline is whether you decide to make a fortune or not from any specific economic announcement, always tread with caution around economic news events. Volatility is guaranteed more often than not and your awareness about the economic calendar and all these economic events can help you strategise more effectively. Thus it is like a magic wand that can help you double your profit, pre-empt trends and limit losses with the help of the economic calendar.