Whichever way you turn in the forex marketplace, there’s a myriad of statistics to support its size and appeal. An estimated $5.3 trillion is traded every single day on the foriegn exchange, for example, whilst this space is worth a cumulative amount of $1.934 trillion (which just happens to be 2.5-times larger than the global GDP).
Whilst these figures may shine like beacons to aspiring traders who are looking to access a volatile and highly leveraged market, the derivative nature of currency means that you can occasionally lose considerable more than your initial deposit.
If you are going to be a successful trader, one tool that you’ll want to make the most of is the economic calendar. But why is this important, and how can you use it to your advantage? Let’s find out.
What is the Economic Calendar and Why is it Important?
When you first sign up to an online brokerage site such as ATFX, you’ll notice that the site publishes its own economic calendar.
This is commonplace in the world of forex trading, with the calendar providing a comprehensive breakdown of the scheduled economic and financial events and their proposed release date.
The data is published in a live format too, so traders are able to receive insightful information in real-time whilst also easily identifying the events that are pertinent to specific currency pairs.
This is important, as the world’s major and minor currency pairs are impacted directly by macroeconomic events and key data releases across an array of different sectors.
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From changes in a country’s base interest rate to it latest manufacturing output statistics, these data sets will trigger fluctuations in the relevant currency and can undermine even the most considered of trades if they’re not factored in.
In this respect, the economic calendar enables traders to optimise their strategies in accordance with upcoming events, ensuring that they’re not caught cold by any unforeseen economic changes.
How Should You Use the Economic Calendar?
Of course, by itself the information revealed within the economic calendar means little without being placed in the correct context.
More specifically, you’ll need to identify key and relevant data releases whilst also predicting the likely outcome and the subsequent impact on a specific currency pair.
In this respect, you should strive to monitor the economic calendar on a daily basis, whilst also maintaining a long-term outlook and earmarking future events that will impact on your chosen currency (both in terms of the speculation that occurs prior to the event and its subsequent impact).
At this stage, you’ll need to combine the key analytical tools featured on your trading platform with a deterministic outlook, as this will enable you to predict future price movements whilst also respecting the underlying laws that govern change in the market.
By staying ahead of the curve, investors will have already tailored their trades by the time that the event unfolds and a subsequent announcement is made.
The only caveat here is that you’ll need to utilise stop-losses on your trading account, as this will help you to close positions once they’ve incurred a predetermined level of loss.