To outsiders, the FX market can be a confusing and intimidating market to trade considering the huge spikes in volatility that come from seemingly nowhere. An experienced trader on the other hand knows that most of these huge moves in the market that happen on some weeks, and don’t on others, are due to high impact economic news event releases. Today, we’re going to delve into a crucial yet often undervalued trading tool – the Forex Economic News Calendar.

Understanding The Importance of Using A Forex Economic News Calendar

The Forex Economic News Calendar is simply a timetable of potential market-moving events. It helps us anticipate significant economic data releases, interest rate decisions, policy decisions, and geopolitical events that can impact currency prices drastically. Each entry typically includes the event’s time, relevant currency, importance level, and projections. 

Navigating High Volatility News Events

Forex markets are incredibly responsive to economic news, and high volatility news events can create dramatic price fluctuations in the blink of an eye. While this volatility can provide exciting profit opportunities for some, it also carries substantial risk, including slippage on orders and the potential to completely blow a prop firm, or even personal account depending on the the risk you may have open on any trades, or even if you’ve trailed your stop loss to break-even.

Slippage refers to the discrepancy between the expected price of a trade and the price at which the trade is executed. This discrepancy can be particularly pronounced during high volatility periods, possibly leading to considerable losses. Similarly, if you’re trading with a prop firm using their capital, a significant loss can jeopardize your trading privileges and have serious financial repercussions.

The Importance of the Economic News Calendar

Understanding the risks associated with high volatility news events really emphasizes the role the Economic News Calendar plays in our trading strategy. The economic calendar offers a heads-up about upcoming events that could influence the forex market. This information allows us to proactively adjust our trading strategy, mitigating the risk of unexpected market shocks. It also helps us anticipate periods of heightened volatility. With this knowledge, we can either seize the opportunity to profit from large price movements or sidestep these periods to protect our trading capital.

By keeping ourselves aware of high volatility news events, the calendar enables us to implement risk management strategies such as closing trades, tightening stop losses, or reducing leverage. It also provides not only a schedule of events but also forecasts and historical data. This wealth of information can help us to make informed trading decisions and enhance our trading performance.

Maximizing the Value of the Economic News Calendar

To truly harness the power of the Economic News Calendar, it’s not enough to give it a cursory glance each day. Here are some tips for making the most of this invaluable tool. It’s absolutely essential to understand the nature and potential market impact of each listed event. Secondly, we should pay most attention to high-impact events as they are more likely to trigger substantial market movements. These events should be front and center so we can either avoid taking trades, or manage trades we’re already in appropriately. Remember to analyze individual events within the larger economic landscape, taking into account ongoing trends, market sentiment, and other pertinent factors. The economic news landscape is in constant flux. Regularly reviewing the calendar and staying updated with the latest news and forecasts is critical.

Typical Prop Firm Restricted News Events

Consumer Price Index (CPI) – Inflation Rates

The Consumer Price Index, or CPI as it’s commonly known, is a measure of inflation. It shows us how the prices of a basket of consumer goods and services have changed over time. Now, why is this important to us as traders? Well, if inflation is rising faster than expected, central banks might step in and raise interest rates to keep things balanced. This can have a significant impact on currency values. When you see the CPI on the calendar, know that it might be a bumpy ride, and prepare accordingly.

Federal Open Market Committee (FOMC) Meetings

The FOMC meetings are like the Super Bowl of economic events. The FOMC is the branch of the Federal Reserve that is responsible for monetary policy decisions, including interest rates. Any decision they make can send shockwaves through the forex market. Their meetings are therefore critical events that can cause significant volatility. Remember, during an FOMC announcement, it’s okay to pause, breathe, and watch from the sidelines if need be.

Central Bank Interest Rate Decisions

Interest rate decisions are another heavy hitter in the forex world. When a country’s central bank decides to change its key interest rate, it can cause the currency to either appreciate or depreciate in a big way. If you see an interest rate decision coming up on your calendar, it might be a good time to revisit your risk management strategy and ensure you’re prepared for potential volatility.

Non-Farm Payroll (NFP)

The Non-Farm Payrolls, affectionately known as NFP, is a report that represents the number of jobs added, excluding farm employees, government employees, and employees of non-profit organizations. It’s a significant economic indicator that traders use to gauge the health of the economy. A higher-than-expected NFP number signals a robust economy, potentially strengthening the currency, while a lower-than-expected number could weaken it. NFP days can be quite a rollercoaster, so strap in and be ready for some action!

In Conclusion

Understanding these restricted news events is crucial for every trader, especially those trading with a prop firm like FTMO. These events can cause significant volatility and impact our trading performance. As we continue our journey in the world of forex trading, let’s make sure we’re staying informed, managing our risk effectively, and preparing ourselves for whatever the market throws our way. After all, knowledge is power, and staying one step ahead is how we thrive in this game. Happy trading!

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Robert Castillo
FX Trader & Analyst
Writer & Editor

Rob is a funded trader from Toronto, Canada, and has been trading currencies, commodities, stocks, and cryptocurrencies for over 7 years. Outside of trading he enjoys making music, boxing, and riding his motorcycle.