The economic calendar is one of the most important tools for successful forex traders and investors to gain an advantage when trading in the financial markets。

However, some traders choose to ignore the economic calendar, despite its great potential to protect them from price fluctuations and potential losses that may occur after the release of certain economic data.。

There are two types of traders who deliberately ignore the economic calendar, the first is technical traders who focus only on technical analysis, and the second is novice traders。

This article aims to show beginners the benefits of using an economic calendar, but I am sure that technical traders will find some highlights here。

What is Forex Economic Calendar？

An economic calendar is a schedule of economic events that may have an impact on financial markets and their price movements。Whether you're trading forex or any other asset class, economic data can affect your position in the market, so it's important to keep an eye on the calendar throughout the day。

Many trading brokers, websites and platforms offer their own economic calendars with ample resources to keep up to date with the latest economic news。Most of these calendars are similar and are automatically updated, easy to read and offer various features to make the analytics experience easier。

How to Read the Forex Economic Calendar？

Economic calendars typically list the most important events and data releases from major countries around the world each day, focusing on a particular day of the week or month that can help you make a trading plan。

Some of the most common events on the Forex economic calendar include central bank interest rate decisions, GDP data, trade balance data, inflation data and employment reports.。

Most calendars usually have a built-in filter that allows you to select the macro version based on its priority and country or region of origin。The list also includes details such as when each event occurred, the currency affected, and the organization that issued the report.。

Economic calendars typically show previous data recorded in each macro report, such as previous employment data, analysts' consensus estimates and actual data contained in the current release.。

By analyzing news events and fundamental releases, forex traders can monitor market conditions and predict potential price movements around key events。In general, it can form an important part of a forex trading strategy。

Interpreting the economic calendar requires understanding which geopolitical events and macroeconomic releases affect specific FX pairs。For example, the release of macroeconomic data in the UK may affect all currency pairs that are characterized by sterling, such as the GBP / USD currency pair。

Geopolitical events and economic releases in the United States usually have the broadest impact on foreign exchange currency pairs, as the dollar is the world's reserve currency, half of all major currency pairs such as EUR / USD, GBP / USD, USD / CAD, and the USD / CHF currency pair.。

Missing the news could put you at a disadvantage if a major fundamental release triggers significant price movements in the currency pair you hold。

How to use an economic calendar for beginners？

Beginners may not be familiar with how most economic releases and news events affect certain currency pairs。However, you can first focus on two or three currency pairs and monitor their reaction to macro releases and news events of your choice。Given that you are still learning trading skills, beginners should not trade more than five currency pairs。

If you have backtesting software, you can view each pair's reaction to specific news events and macro releases in the past, and you can do this manually without backtesting software。By studying the currency pair's reaction to a macro release or news event of your choice, you can predict the reaction to future releases。

However, you should never assume that the forex currency pair being traded will react in exactly the same way as past press releases, as every moment in the forex market is unique.。Therefore, you should always exercise proper risk management on all transactions。

Most beginner traders are better off avoiding trades that may be affected by major news events, as such events usually bring huge swings。However, if the technical settings support your argument, you can always trade after the event。

How other traders use the economic calendar？

Whenever there is a major announcement, many technical traders will choose to stay away from the market because it is never certain in which direction the price will move after the announcement. This is a cautious trading strategy。

Some traders choose to trade before or after publication to take advantage of price movements that may occur after such publication。Such trades usually carry a lot of risk and are not recommended for beginners, but can be very profitable for experienced traders。

The last group consists of traders who choose to trade the market based only on fundamental releases and news catalysts and ignore the technical analysis part of the trade。This is a very dangerous strategy because technical analysis plays an important role in ensuring the consistency and long-term success of traders.。

The forex market is usually very sensitive to news / geopolitical events and certain macro releases, but long-term profitability as a forex trader requires a combination of technical and fundamental analysis in trading.。

Example

Let's look at an example of recent trading opportunities for the GBP / USD currency pair。In an analysis of currency pairs over the weekend, the economic calendar shows that the Office for National Statistics will release the country's GDP report on Tuesday.。

Our technical analysis of the pair shows that the GBP / USD pair is trading near the main resistance level, which we have identified as a low-risk trading entry point.。So, on Monday morning, we had a bearish trade against the GBP / USD pair after the price hit a key resistance level and turned lower。

By the end of Monday, our trading profit exceeded 100 points, as shown in the chart below。

Most traders are advised to close their positions ahead of Tuesday morning's GDP report, as it is difficult to predict price movements following the report's release.。

Some swing traders and long-term traders may choose to hold profitable trades through GDP releases, betting that prices will then continue to fall, in which case they are correct。

However, given that our trade entry is based on the technical level, fundamental-only traders may miss the entire move。

Conclusion

The economic calendar is an important part of the foreign exchange market, largely driven by geopolitical events and fundamental releases.。Every trader can incorporate economic calendars into trading routines and strategies to improve profitability to ensure they are not caught off-guard by scheduled macro releases and geopolitical events。

Don't ignore the economic calendar just because you're a technical trader。Remember that the ultimate goal of trading is to make a profit, and a brokerage calendar can help you achieve this。