Economic Calendar Trading: How to Use an Economic Calendar

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 of both global and local events that may influence their favourite instruments.

TL;DR

• The Economic Calendar lists key economic events that may influence financial markets, such as reports on unemployment, interest rates, and GDP.

• Traders use it to plan trades by forecasting how events might affect different markets or instruments.

• Types of events include reports like PMI, inflation data, and central bank rate decisions.

• The Expected Impact helps traders gauge the potential market reaction, but it is not a guarantee.

• The calendar should be combined with other tools for more informed decision-making.

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. 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 on 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 the Purchasing Managers Index (PMI) 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.

How to Read the Economic Calendar & Use It For Trading

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

Country & Event

The event name itself indicates what the announcement will be about. 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 to which the event is related, helping them find relevant shares, indices, and other instruments that interest them.

Time

Traders may consider timing as a factor when opening a position, and that’s why the calendar has an estimated time for when 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. 

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 of 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. 

Oil (CL), brent oil (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. 

Moreover, in the Plus500 Economic Calendar, you can view economic data or corporate events (like earnings releases or dividend announcements).

Glossary of Key Events

There are a few key events a trader and investors should keep in mind and keep track of in the Economic Calendar, and these are as follows:

• Manufacturing Business Performance: A performance indicator to understand performance in the manufacturing sector.

• Non-manufacturing Business Performance: Performance indicator to understand the 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 Oil Stocks:Status of oil reserves

• Imports: Total value of imported goods & services

• Exports: Total value of exported goods & services

• Dividends Announcements: Companies announce the dividend payouts to shareholders, indicating profitability and financial health.

• Final Purchasing Managers Index (PMI) Services:- The Purchasing Managers' Index (PMI) is a monthly report measuring business activity. It is based on surveys of over 400 private-sector executives and includes transport, communication, financial services, business services, personal services, and computing Managers’ Index (PMI) 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. 

• Consumer Price Index (CPI): Measures the change in the average price of a basket of goods and services, indicating inflation levels.

• Retail Sales: Reports the total sales in the retail sector, showing consumer spending patterns and economic health.

• Gross Domestic Product (GDP): The total value of all goods and services produced in a country, used to assess economic growth.

• Trade Balance: The difference between a country's exports and imports; a positive balance indicates more exports than imports, showing a surplus.

• Unemployment Rate: The percentage of the labour force that is unemployed but actively seeking work, reflecting labour market health.

• Consumer Confidence Index (CCI): A measure of consumer sentiment regarding the economy, which affects spending and investment behaviour.

• Personal Consumption Expenditure (PCE): Measures the total value of goods and services consumed by households, an important inflation indicator for the Federal Reserve.

• Rate Decision: Refers to the decision by a central bank, like the Federal Reserve, to adjust interest rates, affecting borrowing and economic activity.

• OPEC Meeting: A gathering of oil-producing countries to discuss production levels, which can influence global oil prices and the economy.

• Producer Price Index (PPI): Measures the average change in prices received by domestic producers for their goods and services, often used as a predictor of consumer inflation.

Conclusion

In conclusion, the Economic Calendar serves as a valuable tool for traders by providing a clear schedule of upcoming events that could significantly impact the financial markets. By understanding key economic indicators' relevance and potential impact, traders can better prepare for market volatility, make informed decisions, and refine their strategies. While no event is guaranteed to move the markets in a particular direction, the Economic Calendar offers insights that, when combined with other tools and analysis, can help traders stay ahead of market trends and improve their overall trading performance.

Try Plus500’s Economic Calendar today!