Trading With an Economic Calendar

 

Trading With an Economic Calendar

The most common and most difficult mistake in forex trading is to confuse an economic calendar with the price of the currency. In other words, you should look at the current economic conditions rather than solely at the market prices and trends. Doing so may seem to make sense makes perfect sense, but it does not always make sense.

 

Suppose the economic calendar for the month of August showed that there was an economic recession in Europe. The price of the euro would probably go up sharply as the market believed the markets would not be buying that currency much, if at all.

 

Suppose the same thing were to happen on the other side of the world. The markets might not realize that they had a panic buying of the euro and they would come down on the currency market.

 

The same logic would apply to any other country, as well as to the US Dollar. So, the only time when you need to care about the market price of the currency is when the market prices are extremely low and far below what you expect them to be.

 

One example of this is with the EUR/USD trading. This is not a market for day traders and individual investors looking to take advantage of the current global economic conditions. It is more of a market for governments, central banks, commercial banks, and companies engaged in international trade, investment, and investment banking.

 

If you were to trade the currency pair, especially the USD, you would know how the EUR/USD was doing, and if you were to bet against it you would know how the price of the currency was expected to do in the near future. This would allow you to act in the best interest of your money and in the interest of the investment process.

 

Now, if you are an individual investor, and you are planning to invest in forex trading, there is no reason to assume that the market will necessarily move in the direction of the economic calendar. You do not know the state of the markets, so why should you care about the behavior of the market?

 

As you become more skilled at dealing with the markets and more confident in your judgment, you will get better results by trading according to your economic calendar. In fact, you will find that the markets will even move more in line with that idea.

 

You should follow your own rules and create a system based on economic conditions and the trends in the markets rather than using the economic calendar. In short, you should take an economic calendar and project it backwards and forex trading should follow suit.

 

As the markets keep moving forward, the price of the currency that you traded should also keep moving. If you trade the market in accordance with the trend of the economic calendar, you should have good profits.

 

For those that want to learn more about sound forex trading, there are many resources available online and offline. In particular, you can look at the work of Brian Boutros, who is a professional trader and a very famous trading instructor.