For example:. In sum, expectations of rising rates are a reliable and potent fuel for higher currency prices, and expectations of falling rates are the opposite. Details of these may vary from country to country. You need not memorize them. Rather, check any good online economic calendar like those of ForexFactory. These rank events by importance and include explanations of the significance of the data. Again, you could follow more indicators and reports on forexfactory but these are enough to get you started. Though all financial markets can be influenced by major geopolitical events like news of political instability in key countries or military actions, few are as sensitive as the forex market because of its extremely international nature.
Of course, certain currencies and their related pairs will be especially sensitive to related local developments.
Understanding forexfactory.com events
As stock prices reflect market sentiment about companies, so do currencies for countries. Thus, they are responsive to geopolitical changes insofar as these affect expectations for interest rates, growth, trade and capital flows, and so on for the underlying economies. Because the professional traders who manage the big money in forex focus first on risk management take the hint, so should you , the first rule of trading based on geopolitical unrest is that markets tend to sell first and ask questions later. In other words, markets are prone to volatility in times of serious unrest. Remember, whenever professionals fear any threat to their capital, they quickly retreat into cash, especially safe-haven currencies, until the political risk fades.
In sum, a general rule of thumb in all kinds of financial markets including forex is that politics usually trumps economics. In other words, very good or bad geopolitical data tend to outweigh economic data. You should know how to view additional details of a news event as well as which events are most likely to cause an increase in volatility.
How to Use the Forex Factory Calendar in 2021: The Ultimate Guide
Next, we will get into how to strategically position your trades around major news events so as to minimize your risk. The reason we want to use the Forex Factory calendar is to know when market-moving news is expected and thereby prepare for periods of high volatility.
Continue reading for more information or start playing around with a Forex EAs Generator and build automated strategies for news trading. By now you should know how to configure your Forex Factory calendar as well as how to manage news events. Let's move about actually trading the forexfactory news through the price action strategies that form on your chart after the news is released.
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What is a pin bar, really? How about an inside bar? You probably know what they look like, but have you ever thought about why they form? These two strategies have a common thread — they are both the byproduct of news. Whether it be something that was just announced or a more gradual flow of news that causes market sentiment to either fluctuate or remain constant. In fact, all Forex trading strategies are a byproduct of news in one way or another. However, the pin bar and inside bar price action really embody the essence of how news can influence a market.
Pro Tip: Stick to the higher time frames 4 hours and daily in order to get a better feel for the impact of a major news event. Some of the best pin bars form on the back of a major news event. In fact, one of our favorite setups is the NFP pin bar. The timing of a news event like this can often cause the price for US Dollar pairs to rise or fall quickly, thus forming a 4-hour pin bar.
The inside bar can be thought of as the opposite to the pin bar. While the pin bar represents a volatile push in either direction, the inside bar represents consolidation after a large move. So whereas the pin bar forms as news is released, the inside bar often forms the day after a news release. This is why the inside bar setup is often referred to as a type of breakout strategy.
Pro Tip: While the pin bar can be traded on the daily or 4-hour time frame, the inside bar is best traded only on the daily time frame. The markets can move because of an unscheduled event or perhaps an event that has already passed and the market is just now realizing the impact. Regardless of how or when the news occurs, the two strategies above give you a quick and easy way to read the news via your charts.
We have covered a lot of material in this tutorial.
Forex News Sites: Top 10 Forex News Sites To Trade The News Effectively | Trading Education
Everything from how to configure the Forex Factory calendar to how to use it when trading price action. As such I would like to summarize some of the more important points to keep in mind when using the news calendar. First and foremost, the news calendar should never be used as a tool to help you enter the market. In other words, attempting to trade a news event for the volatility it causes is a surefire way to blow up a trading account. The calendar can, however, be a great way to keep track of upcoming events.
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Knowing when these events are scheduled can help you make decisions about the timing of your entries. As a price action trader, you have a distinct advantage over other market participants using something other than price action. Press representatives from around the world ask questions. No one knows the questions. And, no one knows what the answer will be too. As such, the USD makes large swings all over the charts. Effectively, it trips stops both for longs and for shorts. Inflation shows the change in the price of goods and services over a period of time.
It is one of the closely watched Forex news. The market reaches extreme Forex volatility levels if the CPI deviates from the target. Traders know the Fed closely watches inflation. Part of its mandate, the Fed targets a two percent level for the CPI. Instead, it considers the Core CPI.
Or, inflation without transportation, energy and food costs. The standard interpretation is that when inflation falls, the currency depreciates. When inflation is in the fall, expectations grow that the Fed will ease the monetary policy. After all, trading is a game of expectations. However, if deviates strongly, the Forex volatility spikes as traders bet the Fed will react. Everyone knows these days that the ECB has a problem with inflation in the Eurozone.
More exactly, with the lack of it. In this relation, levels of 1. Higher inflation levels lead to the central bank raising rates. Contrary, lower inflation results in the central bank cutting rates. Higher rates mean a higher currency, while lower rates are bearish for a currency. It is clear now why inflation is so important for the central banks.
Hence, it is one of the most important Forex fundamental analysis indicators. The end of October saw the inflation in the Eurozone unexpectedly falling. As per the economic calendar, the expected or forecasted value was 1. However, the actual number came at 0. Hence, market participants started to sell the Euro in a frenzy.
Because part of the fundamental analysis of Forex market is to trade expectations.
How to use Forex Factory Calendar?
In this case, based on the inflation data, expectations grew that the central bank will cut rates at the next meeting. Cutting rates are bearish for a currency and sellers step in. So they did, as the chart above shows. The next ECB meeting was after two weeks and traders sold the Euro on rate cut speculations.
This is how the economic calendar Forex influences trading decisions.