The Economic calendar
The AvaTrade global Economic Calendar comprises routine financial events which affect the financial markets. Skilled traders anticipate these events and plan their trades in accordance. Each of these events can create changes in different instruments’ value, usually on a smaller scale.
What is an Economic Event
The events on the AvaTrade economic calendar are pre-scheduled, and include statements made by countries and other leading players in the financial arena such as central banks, the International Monetary Fund (IMF) and others. A declaration stating the monthly unemployment rate of a country, for example, can cause fluctuations in the local currency value.
The preference of central banks and other major players is towards a calm and stable market, and in this way most instruments usually act. However, sometimes events can create major waves massively impacting the financial markets.
Fundamental analysis for Economic Calendar
Experienced traders know how to plan and perform their trades according to the calendar both before and following the events. Using the economic calendar is part of fundamental analysis, trying to predict which way the market will go in order to make informed and wise trades.
Before an event from the calendar takes place, the trader will study the general state of the economy, review similar past events and more. Based on those factors and others, he will try to speculate the effects the event will have on various instruments. This is the basis of fundamental analysis – predicting the market trends based the current finance situation, past patterns and volumes etc.
Some traders, usually more experienced ones, will open positions before the financial event. If such a trader speculates that the announcement will bring to a rise of the instrument’s value, he will open a buying position prior to it, in order to sell it once it will go up and take profit. Other traders, however, will linger with their trades until after the announcement as part of their risk management.
On the first Friday of every month, the U.S. Bureau of Labor Statistics releases the overall number of employees in the US, excluding some fields such as government workers, agriculture and non-profits. This report is called the ‘Non-Farm Payroll’. It reflects approximately 80% of the US working force. Financial news desks and companies post forecasts relating to this announcement. This triggers attention by traders, anticipating the announcement and trying to predict and plan trades. Once announced, traders compare the report to their speculations before the release. If the rate is better than forecasted relevant markets will experience a rise. A higher unemployed number, however, will cause most markets to decline. The non-farm payroll can affect the many other fields such as costumer consumption rate, stocks and more. This is why it is considered an event with major financial influence.
It is important to bear in mind that any trends that occur after the event is also influenced by many other factors. There is no certainty the market will react the exact same way every time, since there are many other elements that affect it.
AvaTrade’s Economic Calendar
It is would be wise for all traders, regardless of the instrument, to follow up closely the Economic Calendar. As seen in the example given, any event might affect several instruments. Trading side by side the calendar will help you understand the market and stay on top of it. Accompanied by time and practice, the calendar can improve your fundamental analysis and predictions based on upcoming financial events.
It’s time to open an account and start trading based on upcoming economic events!