Economic Calendar Analysis for Forecasting the Behavior of the Market
An economic calendar is employed by traders to track market-moving, economic events, including national economic data and monetary policy initiatives. Market-moved events, which are usually formally announced or released via a news release, carry a high risk of affecting the foreign exchange markets. The foreign exchange markets are particularly sensitive to sudden changes in policy, so if such an event occurs it is important to take action before the situation becomes significant. Traders need to stay on top of these changes to prevent major losses. While experts debate on how regularly market signals should be traded, most experts recommend daily or weekly follow-through for optimal performance.
An economic calendar shows currency pairs that are due to change and those that may be expected to change. Currencies that are due to change include the euro, yen, Swiss franc, Australian dollar, and the British pound. Meanwhile, currencies expected to change are usually those that are already strengthening. For example, a Swiss franc weakening will likely lead to cheaper Swiss Francs (making them more attractive to international investors), which will eventually lead to Swiss citizens buying other foreign currencies. Similarly, an Australian dollar strengthening will make Japanese yen trading more expensive, so traders who are expecting an Australian dollar strengthening will want to take advantage of the move before the trend reverse.
An economic calendar can provide a trader with important information about an impending announcements regarding economic data or news releases from central banks. If there are significant developments, the timing of the announcement could be crucial. In addition, traders should be prepared to monitor closely the trends it leads to and react accordingly. By being on top of announcements and movements in the markets, a trader can take advantage of a profitable reversal before it reverses out of their favor.
An economic calendar can be an extremely valuable tool for investors, both foreign and domestic. It can give a basic overview of which way the markets are moving and what the impact will be on various currency pairs. As they say, a bull market is characterized by over the average price, while bear markets are characterized by under the average price. The calendar can help traders determine if they need to stay on the stock, currency or commodities side of the spectrum or if they should look elsewhere for stock investments. In addition, it can give them a general idea of what the data will have in store for the next few days.
The timing of the release of the economic calendar and its importance to investors will be seen as critical in making investment decisions. The best time to buy, sell, or make other moves is when the data will be released. A lot will depend on the timing, though, because economic calendars differ from time to time in terms of their length and coverage. It would be best to know the information ahead of time.
Timing can also be influenced by the day of the week. A Friday release is better than Monday one since Friday is typically the business day and most institutional investors have their business day on Saturday. However, Friday is not the only market day during the week. All markets close on Wednesday, so the investor should look for economic calendar information on non-week days as well.
Timing is also affected by data availability. For example, when the data is more available or is expected to be more available in the near future, then investors can be better prepared to take the market in their swing side. Data availability can either be delayed or not, depending on the market condition at that particular moment. This can affect the timing of buy or sell decisions, especially for traders who already have their stop-loss orders in place. Having this kind of analysis beforehand can give a trader more confidence in his forecast and in the strength of his strategies.
Economic calendar analysis is just one among many tools that a trader can use in anticipating the behavior of the market. Some calendars also include charts and other visual analysis tools. The key here is to know how to interpret and combine these tools with other tools and techniques. The more information a trader can gather and analyze using economic calendar analysis the faster and more accurate his forecasts will be. Economic calendars are useful tools for predicting the behavior of the market and are just one of the many possible tools for forecasting the behavior of the market.