As a trader, the Economic Calendar is one of your best friends. You will only spend one minute or less with it a day, but that one minute, every day, is crucial if you want to become a consistently profitable trader.
An economic calendar shows the scheduled news events or data releases related to the economy and financial markets. These include GDP, Non-Farm Payroll numbers and interest rate decisions.
Each event is graded depending on which Economic Calendar website you use. Minor events likely to have minimal market impact are marked as “Low” (low impact), or don’t have any special markings. Events that may have a market impact are marked as “Medium” and usually have a yellow dot or yellow star beside the event. Yellow indicates some caution is warranted at this time. Red stars/dots, or a “High” marking, indicates a significant news/data release which is highly likely to move the market in a significant way.
The events marked red are the ones you need to be aware of. Whether the data comes out way above, way below, or right in line with market expectations, volatility around the event is typical.
When trading with a tight bid/ask spread and significant liquidity, typically your stop loss order will get you out of the trade at the price you expect. When a high impact data release come out, things can drastically change. You face a very high chance of slippage, which is when you get a worse price than expected on an order. What was supposed to be only a 1% risk trade could end up resulting in a 3% loss or more, just as an example.
Avoid unnecessary losses either by market volatility, spreads and slippage, and be aware at all times of the dates and time of Economic news releases.
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