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Lesson 2. Using an economic calendar
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13 min read

This lesson introduces the economic calendar, an essential tool for fundamental analysis. The economic calendar tracks upcoming macroeconomic events and data releases that influence financial markets. Understanding how to interpret and use this calendar effectively helps traders anticipate market volatility and make more informed trading decisions.

What is an Economic Calendar?

An economic calendar is a schedule of economic events, indicators, and announcements that affect financial markets. It provides traders with information about:

  • When key economic data will be released
  • Which currencies or markets will likely be affected
  • The expected impact of these events on market volatility
  • Previous values and forecasted expectations for economic indicators

Economic calendars help traders plan their strategies around potentially market-moving events, allowing for better risk management and opportunity identification.

Why Economic Calendars Matter

Macroeconomic news announcements frequently trigger increased market volatility. According to research cited in the reference material, central bank meetings had the highest average impact on forex markets in 2020, moving currency pairs by an average of 150 pips.

This volatility typically lasts between 30 minutes and 2 hours following a significant news release. While this volatility may present trading opportunities, it also carries increased risks:

  • Price gaps and jumps
  • Widened spreads
  • Potential stop-loss triggering
  • Price slippage

Monitoring the economic calendar should be an integral part of every trader's risk management strategy, regardless of whether they primarily use technical or fundamental analysis.

Components of an Economic Calendar

Most economic calendars contain similar information, though the exact layout may vary by provider. Key components include:

1. Date and Time

  • When the economic data or event will occur
  • Usually adjustable to your local time zone

2. Currency/Country

  • The currency or economy affected by the event
  • Helps identify which markets may experience volatility

3. Impact Rating

  • Visual indicator (often color-coded) showing the expected market impact
  • Typically ranges from low to high importance
  • Example: Red for high impact, orange for medium impact, yellow for low impact

4. Event Name

  • The specific economic indicator or event
  • Examples: Non-Farm Payrolls, GDP, FOMC Statement

5. Details/Description

  • Additional information about the event
  • May include the data source, frequency of publication, and how the data affects markets

6. Actual Value

  • The released figure (appears after the event)
  • The most important number that markets react to

7. Forecast Value

  • The consensus expectation from economists and analysts
  • Market reaction is often based on the difference between actual and forecast values

8. Previous Value

  • The last reported figure for this indicator
  • Provides context for interpreting the current release

9. Historical Data

  • Charts or tables showing trends in the indicator over time
  • Helps put current readings in historical perspective

Popular Economic Calendar Resources

Several financial websites and trading platforms offer economic calendars:

1. Forex Factory

  • One of the most widely used calendars
  • Color-coded impact levels
  • Detailed descriptions of events
  • Historical data with charts
  • Customizable filters by currency and importance

2. Trading Platform Calendars

  • Most brokers and trading platforms include built-in calendars
  • Often integrated with chart tools
  • May highlight restricted trading times for certain account types

3. Financial News Sites

  • Bloomberg, Reuters, Investing.com
  • Often include market commentary alongside calendar events
  • May offer analysis of expected market impact

Key Takeaways

  • The economic calendar is an essential tool for anticipating market volatility and planning trading activities.
  • Macroeconomic news releases often trigger significant price movements, with effects typically lasting 30 minutes to 2 hours.
  • High-impact events like central bank meetings can move currency markets by 150+ pips on average.
  • As markets react to this discrepancy, understanding the difference between actual and forecast values is crucial.
  • Economic calendars help traders manage risk by identifying periods of potential increased volatility.