An economic calendar is an essential tool to gauge the market’s likely or pending direction accurately.
Economic calendars will display all upcoming, scheduled economic news releases that can impact asset prices, market behaviors, and, ultimately, profit and loss in binary trading.
The calendar will still require a lot of interpretation, especially for binary traders, but it’s a huge advantage that allows you to avoid completely ill-fated trades and capitalize on possible repercussions of economic news.
Key Facts About the Economic Calendar for Binary Options Trading:
- Asset prices fluctuate based on news information. Inflation is rising; for example, investors and traders, both institutional and retail, buy and sell different assets.
- Various corporate organizations, governing bodies, and government agencies release information pertinent to the trading landscape, aggregated by economic calendars and released on a scheduled basis throughout the year.
- GDP tracking data, interest rate adjustments, inflation data, and house price indices can all constitute economic indicators and, as such, impact asset prices.
- The economic calendar gives binary options and other traders specific countries’ economic data on a certain date, thus allowing you to prepare for potential upswings or downswings in the instruments you’re trading.
- Staying up to date with an economic calendar enables trading on price increases, decreases, or simply price movements (one-touch options).
What is the Economic Calendar?
An economic calendar is a trading and investing calendar that lists economic information’s scheduled release dates, such information deemed to have a significant impact on the financial markets likely.
Financial markets are very much news-driven vehicles built on supply and demand. They record visible price movements in response to important news or economic events, such as hikes, mergers, defaults, buyouts, etc.
The economic calendar is a constantly updated timetable of pending economic data releases (news) and relevant economic events. The information is ranked for its level of importance and potential impact on financial markets.
Many economic calendars can be found online, often from your broker. They’re usually organized by country, with each data set color-coded to denote greater or lesser significance (red typically indicates highly impactful news, whereas the color yellow is often employed for news unlikely to generate the same level of volatility).
The calendar is usually divided into three principal categories: indicators, market indicators, and political events.
GDP data, inflation, and unemployment will constitute macroeconomic indicators, while exchange rates, commodity prices, and stock market indices will be deemed market indicators.
Political indicators include central bank announcements (usually regarding the interest rate), elections, and assorted referendums. The economic calendar’s value is very easy to see, as a definite historical correlation exists between the news it presents and market conditions. Serious traders ignore it, but most find it a boon to profitable trading.
(Risk warning: Your capital can be at high risk)
How to Employ the Economic Calendar for Binary Options Trading
Binary options traders commonly anticipate the effects of upcoming events or recent news, watch it unfold, and trade on the predicted movement with a greater likelihood of success at that moment.
Many others will predict and interpret the news’ effect on markets and position themselves in trades before the news breaks.
It’s important to remember that news is focused－it’s likely only to affect markets directly associated with the implications of that news. Binary traders trading forex instruments often have more opportunity to score with even local news, as one country’s good or bad news means that the country’s currency is rising or falling in forex trading pairs.
Binary options traders as a whole, however, should be overly focused on news and events likely to impact the markets they are trading in, whether that’s because of demographics or interrelated implications.
Interpretation of the News Strength
While an economic calendar typically highlights potential impacts from high to low, binary options seldom give traders the same chances of eventually being right, unlike forex and other traders.
This means that checking the economic calendar should be a daily event for binary traders, so potential impacts are in their minds when looking at more detailed technical indicators while charting.
While the calendar will, by default, display all noteworthy upcoming economic data, you can typically customize the time frame/snapshot to select a date range that best suits your trading aims.
The calendar’s color coding helps interpret news strength, but only experience will reveal the true impact various scheduled reports and events have on the markets.
Here, there is no substitute for close attention, and with the passage of time, the economic calendar becomes more and more revealing when you consciously note the effects of its contents on your trading over time.
You’re aided in preliminary weighting to some extent by the fact that events are extensively labeled, date and time zone are indicated, and good calendars will show the event’s implied and extensive previous data in tables, too.
Pros and Cons of Using the Economic Calendar
- Informed Planning: An economic calendar helps plan future events, making trading more strategic and intuitive.
- Market Anticipation: Understanding how economic data impacts market decisions can prepare traders for successful trades.
- Risk Management: Anticipating volatility based on the calendar aids in negotiating adverse market conditions.
- Timing Advantage: Predicting price movements based on news offers a significant edge in binary options trading.
- Educational Tool: Frequent use of an economic calendar helps new traders quickly improve their market understanding.
- Unpredictable Impact: The economic calendar is not always accurate, as news may not affect markets as expected.
- Limited Scope: It serves as an indicator rather than a definitive guide, requiring traders to interpret and weigh news for effective decision-making.
Pros of using the economic calendar when trading binary options:
- An economic calendar lets you plan for future events, making your trading smarter and more intuitive.
- Anticipating second-tier market fluctuations (noting how inflation or employment data impacts central banks’ policy decisions, for example, leading to direct implications on instruments you might be trading) allows you to be prepared for successful trades.
- Risk management is aided by following the calendar, as volatility that works against your personal strategies can be anticipated and negotiated.
- With binary options, anticipating a moment’s price movement based on good or bad news is a huge advantage.
- The economic calendar is essential reading for new traders. It educates with frequent use, allowing novice traders to improve their understanding of markets quickly.
Cons of using the economic calendar when trading binary options:
- The only real downside of the economic calendar is that it’s not a prophet. Sometimes, perhaps often, depending on the instruments you’re trading, seemingly impactful news will not have the effect you imagined. If you’re trading forex instruments, for example, and China was supposed to take a big knock on the back of upcoming slowing growth reports, the yuan might indeed dip in forex pairs, but if you’re using instruments connected to, say, precious metals, those options might shrug off bad news like nothing (China is a major producer of silver) as the fundamentals of demand keep growing.
- The economic calendar is an indicator, not cast in stone, and weighing the news it depicts is important for those looking to glean a legitimate market view and trade with the trend in their favor.
(Risk warning: Your capital can be at high risk)
Which News Is the Most Important on the Economic Calendar?
Taking the US markets as an example (although central bank decisions are weighty wherever they’re issued), the Federal Reserve’s interest rate decisions and Non-farm payroll data (NFP) are two of the most important snippets of economic data for traders.
Some of the most impactful data for the US markets include:
- Federal Reserve interest rate announcements
- Non-farm payrolls (NFP)－this data is released on the first Friday of every month and can be surprisingly globally impactful
- Employment and unemployment data
- Consumer Price Index (CPI) and inflation updates
- Retail sales
- Business and Consumer Confidence indices
- OPEC News and the EIA Crude Oil Inventory
- GDP
- Produce Price Index (PPI)
- New and existing home sales
- Durable goods orders
- Balance of trade
Every country and every market will have its own particularly weighty news types or events, but the US version gives you a good overview of what is important.
With regular trading, extrapolating macroeconomic, market, and political news into trading realities pre- and post-news or events becomes an essential skill for binary options traders.
Conclusion: An Important Tool to Alert You to Market Volatility
While every type of trader will sift through the economic calendar and slowly filter out those data that impact most heavily on their trading instruments, strategies, and objectives, binary traders can often capitalize on anticipated price movements as markets knee-jerk in response to certain news snippets or events.
A daily scan of the economic calendar is one of the first habits every binary options trader should develop, as it provides an invaluable macroeconomic perspective that can gradually be brought down into finer detail with regular practice.
For binary traders, once news has been released, success often comes by focusing on price patterns and trading developing trends.
(Risk warning: Your capital can be at high risk)
Most asked questions about economic calendars:
Which are seen as the most important news events on the economic calendar?
Economic news or events about inflation, interest rates, GDP, and employment or unemployment are widely considered to be the most significant, and this is because, historically, this has been the case. Because of the diversity of instruments in binary options trading, you should be aware of potential implications for your strategies, regardless of the country issuing the data.
Which country is seen as the most impactful contributor to an economic calendar?
Notwithstanding the point above, a lot of economic data will relate to markets within the issuing country, but the USA, China, Germany, Japan, India, and the UK have a disproportionate impact on global affairs, being the six leading economies by GDP on the planet.
How can I tailor an economic calendar?
You can fiddle with some economic calendars to allow you to see events based only on the country or only on anticipated impact. The economic calendar is a tool that deserves experimentation, and you should compare available data and layouts of various calendars, as well as personalize options, to determine which one best suits your needs.
Is an economic calendar really a binary options trading tool?
In trading binary options, your risk is capped by your invested amount. Nonetheless, trading while oblivious to significant economic news will increase your percentage of losing trades while keeping you blind to a host of potentially successful entry points.
An economic calendar may be a macroeconomic news aggregator seemingly far removed from the minutiae of binary trades, but its contents often result in sharp price movements- the bread and butter of binary traders.
How does the economic calendar help me trade binary options?
The economic calendar will alert you to news and events ranked as high, medium, or low impact. From this macro view, its data can be extrapolated to the point of trade when you anticipate the ensuing price movements, trends, or trend reversals.
An economic calendar shows the country, date and time, and nature or name of the economic data to be released, but most also include an anticipated value (based on professional analysts’ predictions), what the actual number is after the data is released, and what the value was previously. All this information helps binary traders glean legitimate signals for trade entry.
