Economic calendar trading tips
I always use the economic calendar to make some predictions for my favorite assets. And, of course, I use it for trading on the news. So I’ve decided to share my thoughts. I made the description of the economic calendar and its influence on trading.
What is the economic calendar?
The economic calendar is the tool used by almost every binary options trader. Nevertheless, there are many questions as to how to understand the economic calendar.
The economic calendar contains all the most important economic data and reports from around the world. Based on these data, investors make decisions about buying or selling assets. These data may be the annual GDP report, unemployment data, oil prices, change of the interest rates and much more.
Depending on the most important economic news, the charts rise or fall, and in order to trade successfully, checking the economical calendar is a must.
There are plenty of sites that provide economic calendars online.
How to read the economic calendar?
To understand the economical calendar, we will explain each of its indicators:
• Time when the report is published or important economists have conferences or speeches
• Currency and country affected by the news (the news may affect currency and all other assets associated with these countries)
• Importance of the news usually measured from one to three and shows how much news can affect the market
• The event that will take place
• Previous index (which result the news showed in the last reporting period). Comparing this index with the previous period, we can determine the dynamics of an indicator
• The forecast, the result expected by analysts
• The current figure. If the actual figure is better than the forecast, it’s positive for the economy. Accordingly, investors will be supportive and will buy the currency of this country. Therefore, the value of the currency will rise. Conversely, weaker figures than forecasted disappoint investors. They try to get rid of the country’s currency with a poor economical forecast; value of the currency will fall.
How to use the economic calendar: Example
Let’s consider such important news as the publication of nonfarm payrolls' data in the US.
The news is published at 08:30. It will affect the dollar and show the unemployment rate in this country.
The previous rate was 264K (as shown in the right column). Analysts predicted that this ratio would be 245K. However, we see the actual figure is 126K.
The released rate of 126K is less than the forecast 245K, so the economy created just 126K new jobs instead of 245K. Therefore, the US economy is weaker than the investors predicted. You can determine if the figure is positive or negative by looking at the color of the indicator. Green means positive, red means negative, and black mean according to the forecast.
For me, one of the ways to use the economic calendar is buying long-term options (until the end of the day). Often before important publications, you see a flat market, as all the investors are waiting for reports and hesitant to buy CALL or PUT options until the publication of data.
Nevertheless, at the moment of publication of important news, we see a sharp jump up or down in the chart (depending on the results from the report), which forms the beginning of a new price trend. In this situation, the undoubted advantage of trading binary option is that we don’t care how much the price changes. It is enough for us to predict the direction.
When using technical analysis, I also always take into account the latest news since it can support the rise or fall, and it’s risky to buy options against the trend. Knowing how to understand the economic calendar, I will look for signals to buy call options on positive news or put options after negative. You can also copy my signals at binary options' post.