Why is Economic Calendar Important for Traders on Olymp Trade? How to Use It to Trade

 

Economic Calendar Definition?

This is where the Economic Calendar comes in handy for traders. Instead of searching the headlines of hundreds of different financial publications, a trader can use the Economic Calendar to see what financial news will be released and when.

Some of the information that we can track with the Economic Calendar are government reports on growth and trade, interest rate decisions, non-farm payroll unemployment rate data, and inflation reports. These reports affect real time market conditions and create market moving events.

 

Why is Economic Data Important for Traders on Olymp Trade?

Certain economic events and data will affect different markets and in different ways. Understanding the impact of this financial news can help a trader to definitely improve their trading results using fundamental analysis and better prepare them when they develop their trading strategies for independent financial success.

One example of how financial data can affect a market would be the release of GDP numbers from a country. For instance, when Canadian GDP numbers were better than expected, the Canadian dollar performed better in Forex markets against other currencies.

Another example of this would be profitability announcements from major oil companies, which are also in the Economic Calendar. In this case, good or bad news from oil majors can shift trading sentiment for Brent Oil. Secondary markets to oil can also be affected like any USD currency pair.

One last great example would be any economic news that indicates a coming recession for the U.S., major European country, or globally. In the event of this type of news, investors often will move their capital to Gold or even Bitcoin to help protect it from currency exchange losses. Recently, when the U.S. raised tariffs on China and the Yuan dropped in value, the price of Gold rose on the news.

 

How to Use the Economic Calendar at Olymp Trade

One of the great things about Economic Calendars is that you can customize them to focus on information that is most important to you and your trading strategies. Fortunately, Olymp Trade clients can access a free, customizable calendar to take advantage of this great tool.

The economic calendar will appear and this is when you adjust it to your trading style.

The first is to change the time zone to GMT +0 or your country’s time zone. For example, I am Indonesian, I will choose GMT +7.

Next is to use filters. You hardly need to change anything about the currencies of each country.

You just need to scroll down, tick the box of 2 buffalo icons and 3 buffalo icons. Then press apply.

The last interface will appear. See the exact time frame the news will be released today.

What is Weak and Strong news?

At Olymp Trade, the importance of news is showed by buffalo icons:

• Buffalo icons: weak news = a small impact on currencies.
• Buffalo icons: strong news = a considerable impact on currencies.
• Buffalo icons: important national news = a very strong impact on currencies.

There is also some unexpected news that can’t be foreseen. For example war news, terrorist news, etc. These kinds of news often have a very bad impact on the economy of a country = The currency of that country will change very quickly.

How will the market change When there is news?

We often trade EUR/USD and will use this pair to see its changes when there is news about EUR or USD at the 5-minute candlestick chart.

Let’s review the economic calendar on October 25 at 3 pm

3 pm is when news from EUR is released on the market.

EUR/USD currency pair in the morning just fluctuated slightly. Of course, there were some long candlesticks but the price was still in a certain channel. That means the price would never fluctuate too hot (straight up or straight down).

At the beginning of the afternoon, the zone affected by news started to appear. The price fluctuated very strong. It moved up and down unexpectedly.

And this was the zone when the news is released at 3 pm. The price created very unpredictable fluctuations. After the news came out, the price turned back to normal. That means the price had the alternation of red and green candlesticks. At the same time, it created shorter candlesticks than before.

Economic calendar on October 25 at 6:45 pm until 9 pm

From 6:45 pm to 9 pm is the time when EUR and USD took turns to release news.

How did the price fluctuate this time?

The price began to have signs that it moved stronger than before. Exactly from 7:45 pm, EUR/USD started with extremely long 5-minute candlesticks. After that, there were a lot of strong fluctuations in the price. Candlesticks are also more difficult to predict. The price broke down through strong support. Only until the USA officially released the news, the price returned as usual.

Trading Before or after the news item release.

You should start the market analysis long before the news is published. The trend development can be visible a few hours before the announcement. But the best time to enter the market is after the important news is published. This way you will have the biggest chance to make a profit on the price movements.

Bear in mind that these extreme price swings will not be long-term. When you’d rather trade on the quieter markets, you should wait for the news release effect to wear off. In our example, it would mean to wait around 1 hour for the market stabilization.

The way, the news release has an impact on the market should not be one of your concerns. When the time comes, you will see the price fluctuations on the chart and you will conclude. What you ought to focus on is to be ready for the change in the market brought on by some data release.

What are the Most Important Events to Watch for on the Economic Calendar?

There are four major pieces of information that have the broadest amount of impact on financial markets globally. Gross Domestic Product (GDP), Central Bank Interest Rates, Inflation Data, and Employment Data. Let’s explain each of these briefly to help give a good understanding as to why these would be important and why you should track them with the Economic Calendar.

GDP is the figure we use to understand if a country’s economy is growing or shrinking. Usually, every country see some growth, but how much is important. If China’s growth is outpacing Japan’s growth, that is important to the exchange rates of their respective currencies. In general, growth should be beating the country’s inflation.

Inflation and the Consumer Price Index (CPI) are ways to understand a country’s ability to purchase goods and services. If a country’s growth isn’t outpacing it’s prices, it is bad news for people in those countries.

Unemployment data lets us know if companies are hiring more workers or not. We usually compare it to previous data to see if an economy added more jobs, lost jobs, or had no change. This can often be a better indicator of how the economy is really doing as opposed to GDP. If people aren’t working, they can’t afford to buy new iPhones.

Interest Rate announcements from central banks. Most countries in the world have a central bank that determines the interest rate for banks in that country when loaning money to each other. Generally speaking, a lower interest rate is better for economic growth, but there are some exceptions.

The United States is the largest economy in the world not accounting for Purchase Power Parity (PPP) in which case China would be considered the largest.

Therefore, any of these four pieces of economic news that relate to the U.S. is going to have the largest impact on all markets. No offense to other countries, but the U.S. is the economic powerhouse in the world and drives many markets based on their consumer purchasing power.