An economic calendar lists upcoming events that may influence securities and financial markets, such as company reports, economic data & central bank announcements.
An economic calendar lists significant events that may influence the price of securities and financial markets. Read on to find out how the annual economic calendar for trading offers an overview of upcoming financial and economic events, and why traders need this information.
This article at a glance:
- Economic calendars highlight important financial events, such as company earnings reports, changes to interest rates, economic data, and announcements by central banks.
- Traders can use economic calendars to look ahead at events that might impact the financial markets.
- Financial markets tend to experience more activity before and after significant events, so knowing how to read an economic calendar could help you get ahead of the curve.
Why are economic calendars important for traders?
The economic calendar is important because it provides an overview of potentially significant events in the financial sector. Economic calendars feature lagging and leading indicators:
Lagging indicators are data points that follow something. They are variables that change in light of a significant event.
Leading variables change before something happens. They preempt upcoming events and possible changes.
Some examples of lagging and leading indicators on a financial calendar are:
- Interest rates
- Consumer Price Index (CPI)
- Interest rates
- Unemployment rate
- A company’s financial statements
- Stock market data
- Retail data
- Jobless claims
- Purchasing Managing Index (PMI)
You can build a trading strategy by combining these economic indicators with forthcoming announcements, technical indicators, and other bits of useful data.
How to read an economic calendar?
Most economic calendars will include some or all of the following sections:
- Time: When the event will happen.
- Country/Currency: Where the event will happen. This information can determine which economies and currencies could be affected by the event.
- Importance: Measure of volatility that’s typically measured using a three-star system. A one-star rating means the event is expected to have a relatively low impact on the financial markets. A two-star rating is a moderate volatility forecast, and three stars suggest that the event could create a lot of market volatility.
- Event: This is the economic/financial event or announcement that’s going to happen.
- Actual Value: This is the actual value of a currency or financial metric. In the case of Germany’s Producer Price Index, for instance, this figure will show the index’s change in value at the time of the event. The figure is expressed as an absolute number or as a percentage. Green indicates a positive price change, and red indicates a negative price change.
- Forecast Value: This is the value analysts predicted before the event happened.
- Previous Value: This is the value of the last time the event in question had happened.
How to use an economic calendar for trading?
Even though stocks, forex, commodities and crypto are separate asset classes, financial markets don’t exist in a vacuum. A significant event on the stock market economic calendar could affect the forex markets or crypto.
Traders can combine different economic calendars to create their own annual schedules. For example, it’s possible to take data from a forex economic calendar and combine it with a stock market economic calendar. This gives a trader the ability to cross-reference data that may affect their decisions in both financial markets.
Setting alerts is another useful tip for using economic calendars. You can do this via our trading platforms. Alerts can be sent via email, as a pop-up, or as a push notification at a date of your choosing. For example, you can start researching and planning your next Tesla trade in May or June if you know the company’s Q2 report is due in July. You can also combine this knowledge with our trading analysis to make more informed trading decisions.
This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
All trading carries risk.