This article will provide beginner traders with information on how to trade based on the information collected from the US economic calendar, it will include information on the different types of features that the calendar tends to have, and will explain some of the key indicators you need to know and follow on a regular basis.
What is the US Economic Calendar?
- A type of financial calendar that lists economic data releases, announcements etc
- Some types of indicators are more important than others
Prior to making your trades on the Forex market, it is essential to consult the US data calendar. This is to ensure that you are aware of the key upcoming changes and data releases that will likely have an impact on the trades that you plan to make on US currency pairs.
There are many different types of daily data releases, economic announcements, political news announcements, and other important events that occur regularly which shape the US economy and society at large, and therefore, have a significant impact on the trading within the Forex markets.
The US economic calendar is a type of financial calendar that stores all of this information, and is updated frequently in real-time to reflect changes, indicators, news, and upcoming events that traders and financial industry workers need to be aware of.
What's more, there are some changes and indicators that are more significant (in regard to the impact they have on the economy) than others, such as the GDP (Gross Domestic Product) figure that reflects the amount of value of the goods and services generated by a country within a given period, and the US non-farm payrolls figure, which is the total sum of all workers in non-farm jobs and other related roles.
So what should you be looking out for in the economic calendar?
How to trade using the US economic calendar
Before we go to a core info that may help you to trade with the economic calendar, let's also point out the main advantages of this approach.
Being ahead of the curve
- Professionals trade based on anticipations, and tend not to trade at the point when events occur
As always, it largely depends on what you are trading. In the case of Forex trading, it will depend on the currency pairs that you are trading with.
Experienced traders tend not to trade based on the announcements from the US economic calendar, but instead use it for it's main intended purpose (as a calendar) to keep track of the events as and when they occur.
These traders will have anticipated how the data releases will affect the currency pairs they are trading with, and will have made the necessary adjustments to their trading positions in order to respond to any major changes that may occur as a result of the data releases.
Predicting future movements
- Traders can anticipate future changes based on information from the US economic calendar
Feeding into what we just mentioned before, future data releases and announcements will be listed within the US economic calendar ahead of time, and therefore, traders can use the intervening time between the moment that they are assessing the market and their potential options, to the moment when the announcement or data release occurs.
Traders can locate clues within these future data releases which can aid them with their future trading decisions. For instance, if the date of an announcement changes or is moved to fall on a specific date, this can be very telling, and may in fact be a sign of impending changes that are likely to occur within the market.
In addition, professional traders will also take into account what leading analysts estimate for certain data sets, so if the initial results differ greatly from those estimates, it might present a difficult choice for traders in terms of what move to take next.
Elections & other political events
- Elections, political events and the words of politicians and important business people can impact the markets
During presidential elections, trade wars, or other periods of economic and political uncertainty, the markets will be highly volatile and trends will likely be subject to change on a regular basis.
The US economic calendar will be a particularly useful tool during these periods, since traders can at least map out the main upcoming events and releases, in order to try to get ahead of the changes in the markets.
With that being said, some things can occur outside of these releases that may have a dramatic impact on the markets, meaning that the upcoming announcements and events could either create further uncertainty, or could in fact swing the markets back into a more positive overall outlook.
The point is, during these times traders need to pay extra special attention to all of the data releases and announcements, so that they can try their best to anticipate the impact that they may have on the markets.
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While trading up to the economic calendar, it's also very important to make sure you choose the best trading conditions. MTrading has it all! One of the best trading conditions for trading Forex and stocks in the market, empowered by an award-winning trading platform, MetaTrader 4. We deliver top economic news right to your email at the beginning of every week to make sure you are fully equipped!
Enjoy trading the live markets, or practice on a free Demo account with current real-time data in a virtual trading environment, using virtual funds, so you can get a better idea of how the information from the US Economic Calendar can benefit your trading experience and performance without any risk.
The features of the US economic calendar
Perhaps the best feature of the economic calendar is the fact that it updates automatically, reflecting the changes in times, dates and other important information in real-time. Some calendars even include predictions of how the upcoming data releases are likely to affect market trends.
Elsewhere, traders can easily view information by country, indicators, and the potential influence that the announcements or releases may have. Some calendars include useful information such as the value of the period, as well as the forecasted value in relation to the previous period.
Within the economic calendar you will find many different indicators, but they all fall into two main categories:
- Leading Indicators
- Lagging Indicators
Leading indicators tend to change before major economic changes have occurred and therefore, are useful for predicting future trends in the market, while lagging indicators display the performance of an economy in its past (and as is often the case with trading, historical information can be a useful indicator of potential future outcomes and performance).
A good example of a leading indicator could be the retail sales figure, while a lagging indicator could be the unemployment rate (since it measures unemployment for a passed period).
Other very important indicators include the GDP figure, the PMI (Purchasing Managers Index) which measures and analyses the activities of manufacturers, the Consumer Confidence Index, Initial Jobless Claims, and more!
Moreover, these indicators are usually organised and split into three different groups, according to the perceived affect they may have on the economy, as well as the level of volatility they may also cause.
Every economic calendar has a type of 'grading system' which essentially labels these indicators in accordance with the groups, with varying ratings for the level of volatility.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.