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Trading with the Economic Calendar

Plus500 | Tuesday 23 March 2021

The Economic Calendar is an easy to understand schedule of upcoming announcements that have the potential to impact financial instruments, sectors, and even entire markets. By becoming familiar with a calendar, traders can gain a better understanding into both global and local events that may influence their favourite instruments.

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Forecasting Economic Events

Economic events have the potential to shake up markets in an instant. While some events may be unforeseen, many economic events happen on a scheduled timeline that traders can use to better prepare themselves for the upcoming days, weeks, and even months of trading. 

Let’s look at the U.S. unemployment rate. That data is released once a month, and is scheduled months in advance. The last report was on March 5, 2021, and it showed an unemployment rate of 6.2% instead of the expected 6.3%. How an economic indicator performs in comparison to expectations can have an effect on how any associated instruments behave. The U.S. unemployment can affect USD currency pairs and the U.S. indices. Anyone  interested in trading those assets may have taken steps to track the U.S. unemployment rate report.

It’s no secret that traders may rely on tools and patterns when researching their next trade. While many seasoned traders rely on charts and indicators, an Economic Calendar can deliver a potentially new perspective to market trends, forecasting the potential impact an announcement may have on a trade.

The Plus500 Economic calendar

The Plus500 Economic Calendar connects various pieces of data such as the event name, location, time, relevancy and related instruments into an easy to read chart. All data comes directly from Dow Jones.

There are many types of events that Plus500 may include on the Economic Calendar. For example, if you are looking to understand the level of confidence according to Purchasing Managers or the manufacturing sector, you can have a look at the date the ‘PMI Services’ or ‘Manufacturing business performance’ reports will be released. 

A Forex trader who is interested in a broader view of the economy may look at Imports, Exports, Unemployment Numbers, Private sector payroll, or other key reports that deliver information beyond trader sentiment.

Interest rates can also have a big impact on different instruments. Central banks determine how expensive it will be to borrow money or buy treasury bonds by setting the basic rates at which the largest banks borrow and lend money amongst themselves. When interest rates go up, this can be seen as either positive or negative, depending on how the economy is doing. Take the Bank of England, or BOE. The last BOE rate decision took place on March 18, 2021. The GBP rate was raised by 0.1, as expected. This change had the potential to affect GBP currency pairs. However, the BOE decision could also have sent traders to different investments that they believed could offer better returns or lower risk. That means it was important to people investing in stocks and commodities, which are often viewed as safe havens, such as gold.

These are just some of the known upcoming events that traders rely on to get a better birds-eye view of how a company’s sector is performing. This information can then be used to predict the potential performance of a share or an index.

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How to Read the Economic Calendar

The economic calendar is a key tool for online trading. Using this calendar, traders can quickly recognize relevancy, forecasted reports, and related instruments that may be directly impacted by each event.

Country & Event

The event name itself indicates what will be the topic of the announcement. It will indicate the focus of the announcement, such as PMI, unemployment numbers, etc, and allow you to find relevant instruments to trade in the ‘Related Instruments’ column. 

What’s more, next to each event, traders can find the country which the event is related to, helping them find relevant shares, indices, and other instruments that are of interest to them.

Time

Traders know that timing is everything when opening a position, that’s why the calendar has an estimated time that the event will take place. This allows traders to properly collect all the relevant data in order to predict how an event will impact the market. 

Once ready, a trader can open a long or ‘Buy’ position if they feel an instrument’s value will go higher, or a short ‘Sell’ position if they believe that the value will drop.

Expected Impact

Markets are prone to volatility and uncertainty. That’s why traders use the ‘Expected Impact’ column as a tool to better plan their trades. The indication of the impact, marked with green circles, is an estimate and does not constitute trading advice. Yet, it is a crucial piece of information to help traders decide which events they’d like to focus on.

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The Economic calendar is one of many tools that traders can use to gain a better understanding of market movements. Combining the calendar with indicators and historical charts may help develop a more robust trading strategy.

How to Trade on Economic Events

Reports are an indicator into the day to day activity of some underlying assets.

Let’s say for example that an OPEC meeting is scheduled for the end of the week. At the beginning of the week is a planned EIA Crude Oil Stocks report. If you believe there may be a movement based on these events, you can open a ‘Buy’ or ‘Sell’ position on the relevant instruments to the right of the report. 

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Oil (CL), Brent (EB), and Gasoline (RB) are few instruments that could be affected by this announcement so a trader can click on the name of the instrument to start trading it.

It is important for traders to remember that there is no guarantee that an event will impact specific instruments. They should remain aware of the full picture while planning their trades. 

Glossary of Events

  • Final PMI Services- The Purchasing Managers’s Index is a monthly report to measure business activity. It is based on surveys of over 400 private-sector executives and includes transport, communication, financial services, business services, personal services, computing & IT, hotels, and restaurants. 

  • Manufacturing business performance- A performance indicator to understand performance in the manufacturing sector.

  • Non-manufacturing business performance- Performance indicator to understand performance of business in a region. Does not include manufacturing

  • Retail performance- Insight into the performance of retail businesses

  • Unemployment numbers- Filing of individuals who are looking for work but can not find

  • Government Payroll- A meter of public sector jobs

  • Private sector payroll- A meter of private sector jobs

  • Natural Gas storage levels- Status of Natural Gas reserves 

  • Crude stocks- Status of Oil reserves

  • Imports- Total value of imported goods & services

  • Exports- Total value of exported goods & services


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This information is written by Plus500 Ltd. The information is provided for general purposes only, and does not take into account any personal circumstances or objectives. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. No representation or warranty is given as to the accuracy or completeness of this information. It does not constitute financial, investment or other advice on which you can rely. Any references to past performance, historical returns, future projections, and statistical forecasts are no guarantee of future returns or future performance. Plus500 will not be held responsible for any use that may be made of this information and for any consequences that may result from such use. Hence, any person acting based on this information does so at their own discretion. The information has not been prepared in accordance with legal requirements designed to promote the independence of investment research.

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