To many traders, as well as technical and fundamental analysts, it’s a known fact that the foreign exchange market is a highly volatile market. This suggests that regardless of strong market trends and favorable conditions, the market direction can suddenly pursue a different path; the outcome can still be unpredictable. However, by understanding the data featured in economic calendars, a trader can raise his chances of faring well in the forex market.

Economic Calendar Definition

An economic calendar, or economic indicator to some, is a tool that jots down informative and specific details about economic activities. The report is presented weekly, monthly, and quarterly. They are suggestive of anticipated events and their impacts on the market.

An economic calendar is often called economic indicator by some trading fellows; there’s a slight difference, however, between the two. An economic calendar is focused on reporting market events with regard to dates. An economic indicator, on the other hand, tends to come without any date significance.

The Impact of Monetary Policy

One of the constant data that can be found in an economic calendar is an update on monetary policies. This is possible due to the contribution of central banks and other financial institutions; the leaders intend to promote taking the best actions to growth and stability. Since major authorities hold meetings within a year, reports are presented for the achievement of improved economies worldwide.

Calendar Findings

As indicated, it’s no secret that the forex market is a highly volatile market; an economic calendar can gauge the market’s volatility level. It provides a list of usual and outstanding events regularly; other than that, it points out the intensity of volatile levels that are associated to such events.

Typical economic calendar events:

• Consumer Price Index (or CPI)
• Economic and industrial production
• Investments with regard to foreign events
• Monetary Policy Announcement
• Purchasing Manager’s Index (or PMI)
• Retail Sales

How to Use an Economic Calendar

Using an economic calendar is simple; understanding the purpose of particular features is the key. It goes in light with the fact that the market volatility that is shown tends to vary; the results will be dependent on the type of event, as well as on event frequency.

Economic calendar features:

• Green-colored levels indicate volatility level 1
• Orange-colored levels indicate volatility level 2
• Red-colored levels indicate volatility level 3
• Weekly identifiable events include: jobless claims and business performance reports
• Monthly identifiable events include: employment rate and production rates
• Quarterly identifiable events include: Gross Domestic Product (or GDP) and central bank money supply

Article by Taylor Wilman