Why the economic calendar is essential when trading forex and why you should pay attention to the fundamentals of every currency ~ free forex trading demo account download
Subjecting yourself to every piece of news concerning the markets can prove difficult. To the beginning forex trader it even becomes difficult because of the lack of knowledge as to which news is relevant to the forex markets and which news is not. It can also be challenging to know what the news that has just been released means to a currency pair. That is why a lot of forex education majors on the technical analysis- how to trade the charts by analyzing the meanings ascribed to the various candlesticks on the different timeframes. Trading a great deal on the news demands knowledge of the fundamental analysis.But even the most ardent believer in the price action concept of chart or technical analysis will readily admit that there are days that a wise forex trader must have a clue of the economic calendar. Economic calendar could be a weekly or monthly outlook of all news that will be coming out around the world. Of major significance should be the news that has a direct link to the currency pair you are trading.
Economic calendar will help you to make rational decisions when adjusting your stops or locking in profits. For example, if you are trading the EURUSD pair, it is advisable that you have some knowledge of the weekly economic outlook of Euro and the dollar. There are various sites that provide updated economic calendars. If you can access those sites you will see the time and date when news affecting the dollar or euro will be released. The calendar will also indicate the level of significance attached to that news.
If the news is of high significance it will be a good thing to apply protective stops on the trades or open positions that are already in profit. This should be so especially if the market forecasts a negative outlook for the variable concerned. If you are using a Meta trader 4 with a broker that gets news directly from the Wall Street Journal, it is advisable that you pay attention to the live streams provided to you through the news tab of your Meta trader 4. That way if a better than expected news is released you will know what your next action should be.
Remember that your aim is to only pay attention to the most significant news relating to the currency pair you are trading. Of greater significance is normally the news concerning the labor market. This is especially so if you are trading the US dollar. The Non Farm Payroll that is released monthly tends to have a huge impact on the dollar. It comes out on the first Friday of every month unless the Friday happens to be a public holiday in the United States. Its release is normally followed by huge market volatility in relation to the dollar. If the labor market in the USA registers more jobs than expected it signifies that the economy is doing well and you should therefore buy the dollar. That implies that if you were short EURUSD before the news came out you should let your profits run. If you were long EURUSD your stop loss will most likely be triggered or if you are one of those that apply mental stops you should then close all the long positions.
Of course there are rules in relation to trading news and the Non Farm Payroll in particular most of it being about watching for a pullback. But my aim here is not to teach you how to trade the news rather to make you appreciate the need to once a while keep in touch to economic news release. It could be the difference as to whether or not you will make some money. It could also help you stay out of the markets and simply watch.
Other countries whose labor market growth or fall tends to cause volatility within the forex market includes Canada whose labour market news is released on the second Friday of every month. Newzealand, Japan and the Eurozone are also to be watched. Those periods can be perfect opportunities to make more money in your forex account or to employ protective stops and safeguard the gains already made.
Note that I have laid more emphasis on the labor market news. That should not imply that that is the only news affecting the forex market that ever comes out. I only stressed on it because rarely will news concerning the labor market growth stay below the medium or higher rank. Other news such as the Consumer Price Index and Interest Rate Decisions of the various Central or Reserve Banks are also worth noting. Most news will however rank low and there is no danger if you pay no attention to them.You do not need huge capital to start trading. Open a trading account with NORDfx and trade both forex and binary options for only 10 dollars.
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