Economic Calendar.
Most economic calendars provide the news releases for three
world regions or time zones (the US, Europe, and Asia), the times that each
news release will happen in GMT, and the expected Forex volatility for each
news release (either regular volatility or significant volatility). It might
appear apparent what the economic calendar use is, however, there are right
ways to use the calendar and there are wrong ways to use the calendar.
Contrary to what many newbie traders believe no trades
should be made as a result of the economic data that is announced. Retail
traders don’t have sufficient systems and resources to respond to what they
think are real time data. By the time the retail trader has seen the economic
data, analyzed it, thought about what trade to make, it is far too late. It
would be like entering a trend that is just about to reverse itself.
In addition the economic calendar and the various news
announcements is not an excuse to not make any the trades either. If your forex
signals are indicating that the time is right to make a trade then you should
go ahead and trade. Don’t be put off by the fact that a news release is
imminent. Don’t forget that in general a news release causes short term
volatility and does not signal a long term trend but maybe a short term trend
of a few hours or a few days.
Now I can hear you asking, ‘if I can’t trade off the
economic calendar or I should not close down trades when there are imminent news
releases in case there is unforeseen volatility, what should I use the economic
calendar for?’ It helps you manage your trade. Once you know that a trade
release is imminent the first thing you have to decide is if it will cause low
or high volatility. You may then decide that low volatility will not hurt your
trade so you don’t touch it. However, if you decide that the news announcement
will cause high volatility albeit for the short term you might want to check
and manage your stops. There might be a danger that the stops you placed at the
start of the trade are in danger of being reached due to high volatility. So
temporarily you might want to increase them until the market has smoothed
itself out. The suitable reaction to a news release depends on where you are in
the trade and where your stops are.
