To properly define a forex calendar, think about this: you are holding a planner and in it, you have listed the important events in your life. Things like anniversaries, birth dates, and other special occasions are some of them. Within your planner is a calendar listing the holidays for the year. You also have notes on appointments you need to attend on specific dates and other things you need to do.
In a forex or an economic calendar, the holidays and special events in your life represent the activities that happen in the foreign exchange market. The appointments and other to-do things you have listed are the actions you plan to undertake in response to these events.
Based on the analogy provided above, a forex calendar is considered a tool used by traders to be in the know. Information like the unemployment rates, government reports, trade balance, and consumer report index are some of the information a trader is made aware of when using an economic calendar. However, unlike the annual calendar that we have, economic calendars only cover a limited range and can even only offer the market activities within a specific time of the day.
Because a forex calendar provides useful information to traders, they usually use it as a basis to slip in from time to time and make a profitable trade. While all market indicators are considered fluid, using an economic calendar provides traders information on stability and are therefore prepared to make a trade when all indicators stabilize.
Sometimes, the opposite happens when despite market stability, a seemingly isolated market event can cause the market to come alive. In this case, the economic calendars are also used to forecast future trends in foreign exchange.
Apart from information related to reports, a forex calendar also gives users the latest news in the foreign exchange market and world economy in general. Sometimes, the news come with alerts. These features vary depending on the provider of the calendar. Some users set up accounts online to view an economic calendar. Some of them receive it daily by email.
Together with the calendar, users receive news feed and updates related to foreign exchange. Traders will find these feeds useful because they also get updates on how the global market is doing, and based on the events, they become aware of these trends’ effect on foreign exchange trading.
While a forex calendar is considered a silver platter tool for the trader, the information it offers will not be beneficial if it is not properly understood by traders. Some traders wait until they establish a pattern based on these activities before they act. Some use the calendar information they have and analyze their charts to see if the information matches the chart indicators.
The principle of favorability lies in congruence to how the chart indicators, the calendar information, and the type of analysis employed can work together to build a entry and exit points. This means that traders should be certain that they fully understand what is going on so they can turn information into profit.