A forex economic calendar is useful for traders to learn about upcoming news events that can shape their fundamental analysis. This piece will explore the DailyFX economic calendar in depth, offering tips on how to read a forex economic calendar to plan ahead, manage risk, and execute strategic trades.
What is an economic calendar?
An economic calendar is a resource that allows traders to learn about important economic information scheduled to be released. Such events might include GDP, the consumer price index, and the Non-Farm Payroll report. In today’s environment of fiscal cliffs and central bank intervention, it can be very helpful to know the date of the next central bank meeting or major news announcement.
The events on the calendar are graded low, medium and high, depending on their likely degree of market impact. This is what the DailyFX economic calendar looks like.
How to read the forex economic calendar
Knowing how to read the forex economic calendar properly is important to maximize your trading prior to and following the most important releases. Checking the calendar every morning will allow you to familiarize yourself with the upcoming events that matter.
In default mode, the calendar will show you every piece of economic news coming out for the major economies. For many, that will be information overload, so you may want to customize the look.
Customizing your forex economic calendar view
In order to customize the economic calendar, you can look at events in the past, today and in the future by clicking on buttons such as 'Today' 'Tomorrow' and 'Next Seven Days'. It's advisable to change the timezone to what you’re most comfortable with; this is done by clicking 'Timezone'. For most, this will be Eastern Standard Time or GMT-4/GMT-5. Next, click the ‘Currencies’ and 'Importance' buttons to look at the events that are most relevant to you. .
For example, if you’re trading EUR/USD and want to focus on today's news coming out of the Eurozone and United States that is of high importance, your filter would look like this:
As shown in the image above, you can select each event of interest to learn more information about it, the surrounding news and analysis, and also to add it to your email calendar.
Top Benefits of Using a Forex Economic Calendar
The top benefits of using the DailyFX forex economic calendar include:
- Being able to manage risk effectively
- Being in a position to plan ahead
- Having access to extra, helpful features for customisation
Being able to plan your trades based on economic calendar events means you can ready yourself for potential turbulence in price. When an event listed on the calendar occurs, there may be expected a period of volatility if data is released well above, below or in line with expectations.
Understand the principle of risk management in regard to these trades. Risk is the difference between your entry price and stop loss price, multiplied by the position size. Traders should aim for this percentage to be less than 2% of account equity.
The forex economic calendar allows for planning ahead. For example, if a Nonfarm Payroll report is set to be released, traders will know that this indicator has the potential to move FX markets substantially, so awareness of the timings means they can plan their forex trades accordingly.
Benefiting From Features on the DailyFX Forex Economic Calendar
The forex economic calendar provided by DailyFX offers the added benefit of special features such as the customization option mentioned above, offering the facility to select specific timeframes, set alerts and apply filters to make it more relevant to your specific trading strategy. DailyFX also offers free trading webinars to help you plan around major news releases.
Other resources to help you trade the forex market
It can also be helpful to understand the differences between Fundamental and Technical Analysis in forex trading, and how to apply them to your trades.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.