How to trade the Forex news calendar

Jarratt Davis

Special Consultant to the FPA
Some of the best opportunities in trading are created through deviations in economic data. These may include surprise actions by central banks, or even unexpected comments from central bank members. One of the most effective trading tools, therefore, is an economic Forex news calendar. You can find a great economic calendar on ForexPeaceArmy here.

An economic Forex news calendar is a table of upcoming events. These may include economic data releases, planned speeches from central bank members, central bank meetings, G7 meetings, OPEC meetings and many others. By being aware of when events are due to take place, a trader is able to plan in advance and be prepared for any trading opportunity which may arise.

At the very least, an economic Forex news calendar should consist of the country the event relates to, the time and date the event is due to take place, the significance of the event, the previous outcome of that event, and the expected outcome. Most economic calendars will also contain additional information, such as a description and basic information about the event. Premium calendars can provide information about the range of economists’ expectations and instant updates upon the events’ release.

It’s important to recognise that only a few events will actually provide trading opportunities. The ability to determine which events are ‘market-moving’ is critical to being able to successfully trade off of the economic calendar.

Which Data to Trade on a Forex News Calendar

Several factors determine how market moves an event. The first is how significant the event is to the market, central bank, or economy. As a general rule, high impact/tier 1 data releases are usually the best market-moving events. Any event listed as low impact/tier 3 or medium impact/tier 2 is unlikely to bring a trading opportunity.

The second factor to consider is how frequently the event takes place. A weekly event, for instance, will have little impact. Annual or bi-annual events tend to have a much greater capacity to move markets. Most events take place once a month to once every six weeks.

The final – and arguably most important – factor is whether the event is likely to influence a central bank’s monetary policy. With the mandate for most central banks being inflation and employment, inflation data releases (such as CPI and employment data releases) make for some of the greatest market-moving events. When a central bank mentions a requirement to raise rates or a risk that may lead to cutting rates, you can usually expect an imminent trading opportunity.

Generally speaking, most weeks will contain between 2 and 4 market-moving events. However, some weeks will contain none, whilst others contain several events almost every day. These events can provide high conviction trading opportunities. These go a long way in improving a trader’s performance and growth.

Every Sunday, one of my analysts creates a 10 minute video listing and explaining the most important market moving events for the upcoming week and I post these video on the forum here. Make watching these video part of your preparations for the week ahead and if you are interested in other productive habits successful traders need to adopt, sign up for our webinar here.