The Economic Calendar is a specific calendar that gives us the news that affect the global financial markets. It is important to follow this calendar because news often changes the market trend.
The idea is simple to explain and understand. Most people who trade in the financial markets such as Forex or binary options use trading strategies based on technical indicators. Most of these technical indicators are mathematical algorithms that use historical data to try to predict future price developments, and thus we “guess” if a particular asset will go up or down.
Since there are news that are important, their results, above or below the expectations, tend to change the direction of the price of the asset, thus going against what was forecast by these indicators. This is because an important news story may determine if the price of an asset will rise or fall, interrupting the trend that the asset was following based on a normal technical progression.
How to use the Economic Calendar:
In this sense and to avoid the surprises that the news can bring, my advice is to always be attentive to the news of the day and the hours in which they are announced by following the Economic Calendar. The advice I always give my students in class is: before starting to trade, the first thing to do is go see the news of the day and avoid trading assets, which have important news scheduled, at the time the news is announced.
This way you prevent a news story from interfering with your strategy, or with the predicted rise or fall that your analysis showed at that time.
On the other hand, those who use the News Trading strategy should use the calendar as a trading tool.
I use the ForexFactory economic calendar. There are others, such as the Investing economic calendar, but this is the one I have always used and I think it’s the best. If you want, you can also use their iOS and Android apps.
To understand and use the Forex Factory economic calendar, you should first change the timezone so that it coincides with yours. After the timezone is the same as yours (so there is no confusion!), you need to pay attention only to the news that have a Red icon. These are the news that you actually have to be careful with and avoid trading when they are announced. The others are not a problem, because they very rarely influence asset prices.