The Importance of an Economic Calendar for Day Trading

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Learning to use the Economic calendar in binary options trading

He has provided education to individual traders and investors for over 20 years. Article Reviewed on November 30, Gordon Scott Updated November 30, As a trader, the economic calendar is one of your best friends. You will only spend one minute with it a day or lessbut that one minute—every day—is crucial if you want to become a consistently profitable day trader.

trading options on the news on the economic calendar

Defining an Economic Calendar An economic calendar shows the scheduled news events or data releases related to the economy and financial markets. New GDP growth rate figures, the latest non-farm payroll numbers, and interest rate decisions—these are all examples of what you may find on an economic calendar. There are loads of these economic data releases—at least once a week on average, and sometimes every day during particularly busy weeks.

trading options on the news on the economic calendar

These events are listed on the economic calendar, along with the scheduled time of the release. Each event is graded, and those grades depend on which economic calendar website you use. Minor events that are expected to have a minimal market impact are either marked as "Low" as in, "low impact" or they may lack any special markings.

Basically, the rule for trading news events is this: If high volatility is expected, use the single down grid.

Events that may have a market impact are marked as "Medium," and they usually have a yellow dot or yellow star beside the event. Yellow indicates some caution is warranted at this time.

Economic Calendar

Volatility around the event is typical and expected, regardless of whether the data comes out above, below, or right in line with market expectations. Traders know these events cause volatility, and they may decide to sit out while the markets swing by canceling their pending orders.

Also, as a rule, these sites contain a lot of statistical information, as well as many indexes and indicators that will be useful for each trader. How to use the economic calendar Any economic calendar carries in itself useful information that you need to learn how to apply correctly.

Those canceled orders cause a trading options on the news on the economic calendar in liquidity right before a market-moving event occurs. Since there are fewer platforms for making money on the Internet to absorb market buy or sell orders or stop-loss orders that are triggered by the event, the price will often "whipsaw" quickly back and forth before choosing a more sustained direction.

Trading News and Events in the Economic Calendar

Under normal market conditions, you should know what your risk is on every single trade. However, when high-impact data is released, things can drastically change.

FOREX ECONOMIC CALENDER OUTLOOK AND TIPS TO TRADE NFP

You face a high chance of slippage a worse-than-expected price on an order. You can't know exactly what data will be revealed, or exactly how many orders will come into the market upon its release in a reduced-liquidity environment.

Because of this unpredictability, professional day traders typically close out their forexstock, or futures positions three-to-five minutes before the high-impact data's release.

trading options on the news on the economic calendar

They also avoid taking new trades until after the data has been released. Since that moment of increased risk is scheduled, it can be easily avoided, and it's usually best to do so. If you day trade optionsyou can hold your positions through a major data or earnings release.

Many options strategies are designed for trading these types of specific events. Options are a bit different than other markets, though.

trading options on the news on the economic calendar

Once you buy an option paying the premium your risk is capped—the premium you paid is the potential loss. When you buy an option or close out the trade, you may get slippage, but you can't lose more than the premium you paid.

Thus it is possible for traders to predict volatility and plan their risk-management strategy accordingly. Apart from the importance of specific economic news, market participants also consider the difference between the forecast and the actual results, and also take historical minimum and maximum levels into consideration. Economic news publications and economic reports from countries with developed and developing economies are key events that have impact on rate movements. Rate cuts lead to economy stimulation. Loans become cheaper for the banks first, then for corporations, and finally for customers.

An Economic Calendar For Different Markets Whether you trade forex, futures, or stocks, there is an economic calendar for you. Forex and options traders can use dailyfx. Earnings have a significant impact on price, just like economic data releases.