Reading The Economic Calendar As A Forex Trader
Early on in my Forex trading journey, I never followed Economic events to the tee. I genuinely felt it was useless, and so I left that out of my trading strategy altogether.
One day, I found myself on top of the moon because I had a couple of GBP trades open, which were going incredibly well until… The prime minister began speaking about the challenges facing the UK!
Now, as you can possibly imagine, this left my trades looking blood red. Account blown in a matter of minutes. Just like that.
I had a terrible habit of only checking the economic calendar AFTER my trades had gone HORRIBLY WRONG!! Don’t make the same mistake. To prevent you from making the same mistake, we will discuss a few crucial things about the Economic calendar.
So what is an Economic calendar?
The economic calendar is what gas is to a car. In more technical terms, an Economic calendar is a calendar where traders can learn about the important news events, scheduled before time, that shape or direct the market movement. For example, the central bank meetings, GDP, interest rates, etc.
This calendar helps traders prepare properly and avoid trading at certain times.
How to read the Economic Calendar?
Details of the Economic calendar will differ for each trader for the following reasons:
- The time of releases wll vary depending on your time zone.
- Currencies that you trade.
- Relevant impact of each event on your strategy e.g., a long-term strategy will not be affected at all my a medium impact event. However, a scalpers position could be affected by the same release.
(Source – Plus500)
With all this being said, it is essential to read the entire calendar every morning! And prepare for the events that could impact the positions you are in or have planned to get into.
Reading the economic calendar will help you respond to the markets behaviour without reacting irrationally. When you customize the schedule to your particular requirements, you can PREPARE adequately! This looks different for each trader, NO 2 TRADERS ARE THE SAME!!
Benefits of using an Economic Calendar
There are 2 main benefits for a Forex trader:
1. Manage risk effectively
You can manage these circumstances better and protect your trading capital. When checking the calender before you have time to prepare and decide whether – You want to cut your position partially, close it completely, or consider not placing a trade altogether until you know the overall direction of the currency pair after the event has passed.
2. Plan ahead when you’re in a position.
This is where your risk management understanding expands, and you can learn how to best position yourself in these situations. This can even become part of your trading plan so that you know how to tackle different news events in the future.
Now you may be wondering how you can keep up with everything going on in the work week and manage your positions at the same time?
You could set reminders on your phone for the high-impact news that you want to watch out for.
So traders, don’t forget trading is more than one action, it’s more than placing a trade. It is a full-circle business that requires a lot more effort from us, every single day.
Don’t give up! Keep learning, keep growing, and keep trading!!
Happy Trading Forex Traders.