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Reading the economic calendar

How to trade the news

Contents

1
Reading the calendar
2
News trading and the calendar

Reading the calendar

Our economic calendar shows events cut by trading day.

Helpfully it adjusts the time of each release to your own timezone. For example we can see that the Bank of Japan Interest Rate decision is happening at 4am local time for this particular London-based trader.

How our calendar looks - nice and simple

Event importance

Note that some events do not happen at a specific time. Think of a Central Banker’s speech for example - this can go on for an hour. It is not like an economic statistic that gets released at a precise time. Clicking the finger emoji will open up additional information on each event.

How do you define importance? Well, some events are always unimportant. With the greatest of respect to Italian farmers, nobody cares about mundane releases like Italian farm productivity figures.

Other events always seem to be important. That means, markets consistently react to them and prices move. Interest rate decisions are an example of consistently high importance events.

Traders will often scan ahead to prepare for events that may create trends

So the Medium and High can be thought of as guides to how much each event  typically affects markets. They are not perfect guides, however, as different events are more or less important depending on the circumstances.

For example, imagine the UK economy was undergoing a consumer-led recovery. The Central Bank has said it would raise interest rates (making GBPUSD move higher) if they feel the consumer is confident. 

Consumer confidence data would suddenly become an extremely important event. At other times, when the Central Bank has not said it is focused on the consumer, this release might be near irrelevant. 

Our calendar filters out Low importance events that don't typically move markets and only shows Medium or High. Without this the trading calendar can be very noisy - up to 50 events per day but many of which are irrelevant.

Importance is displayed next to each item

To the right of each item is a finger emoji. This appears when there's additional information. Just click it to open up the extra text, which typically explains a little about the event and provides some context on how to interpret it.

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News trading and the calendar

Knowing which events are coming up is a good start. You will be prepared for the events that create and end trends.

However, to news trade successfully you need to master several concepts and tools:

  • Knowing what markets have priced in
  • Second order thinking
  • Tools like data surprise index and interest rate expectations
  • The two kind of reversals
  • Buy the rumour, sell the fact

We have covered all this and more in this article: News trading and second order thinking. Definitely give that a quick read.

For now here's an image that captures the "buy the rumour, sell the fact" dynamic.

This often confuses new traders ... some "good" news comes out and then a pair does the opposite of what you'd expect and drops. If you want to understand why and how you can predict this, read the article!

Buy the rumour, sell the fact