Forex Trading Tools

Forex Factory Calendar: How to Use This Tool to Anticipate Market Moves

Forex Factory Calendar

The Forex Factory calendar is one of the most popular economic calendars used by forex traders. It provides a detailed schedule of important economic events, data releases, speeches from central bank officials and more. Learning how to use the Forex Factory calendar effectively can help you better anticipate potential market moves.

In this comprehensive guide, we will cover everything you need to know about the Forex Factory economic calendar, including:

Table of Contents

  • What is the Forex Factory Calendar?
  • Why the Forex Factory Calendar is Important for Forex Traders
  • How to Read and Interpret the Forex Factory Calendar
  • Filtering Calendar Events
  • Understanding Impact Levels
  • Date and Time of Release
  • Historical Data
  • Actual vs Forecast
  • How to Use the Forex Factory Calendar
  • Planning Your Trading Schedule
  • Anticipating Volatility and Price Movement
  • Adjusting Your Strategy
  • Tips for Using the Forex Factory Calendar
  • Combine with Technical Analysis
  • Check Multiple Sources
  • Watch for Revisions
  • Beware of Fakeouts
  • Example walkthrough of trading a high impact news event
  • FAQs about the Forex Factory Calendar
  • What are the most important news events on the Forex Factory Calendar?
  • How early before a news event should I close trades?
  • Should I avoid trading during medium impact events?
  • Can I automate a trading strategy based on the Forex Factory Calendar?
  • Is the Forex Factory Calendar accurate?
  • Is there a better economic calendar than Forex Factory?

Let’s get started exploring this powerful forex trading tool!

What is the Forex Factory Calendar?

The Forex Factory Calendar is an economic calendar frequenty used by forex traders to track scheduled events and releases that could potentially impact currency prices and create volatility in the markets.

It provides a real-time schedule of important economic data releases, central bank policy meetings, speeches by bank officials, and other key events that can move the markets.

The calendar covers events for all the major currencies including:

The economic data releases on the calendar include crucial reports like:

  • Non-farm payrolls
  • GDP
  • CPI
  • Retail sales
  • Trade balance
  • Consumer confidence
  • Central bank interest rate decisions

Having an up-to-date economic calendar allows forex traders to know when these market-moving events are scheduled to take place.

The Forex Factory Calendar is free to use and available on their website Forexfactory.com, which is a popular forex forum visited by many active traders.

Why the Forex Factory Calendar is Important for Forex Traders

The Forex Factory Calendar is an essential tool for forex traders because:

  • It allows you to plan your trading schedule – By knowing when major economic data and events are happening, you can plan when to trade or stand aside.
  • Prepares you for volatility – Around economic releases, volatility often spikes as the markets react swiftly to new information. The calendar helps you anticipate these volatile conditions so you are prepared.
  • Alerts you to trading opportunities – Certain economic data can trigger predictable market movements, allowing savvy traders to take advantage and profit. The calendar highlights these potential opportunities.
  • Keeps you informed on market moving events – You’ll never be caught off guard by a sudden fundamental announcement that rocks the markets if you check the calendar daily.
  • Helps frame market context – Understanding recent and upcoming economic events gives you a broader perspective on current market conditions.

In short, diligently following the Forex Factory Calendar allows you to trade like an informed market professional, avoiding surprises and capitalizing on opportunities.

How to Read and Interpret the Forex Factory Calendar

Let’s take a look at how to read and interpret all the information presented on the Forex Factory economic calendar:

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Filtering Calendar Events

The calendar can look BUSY with so many events listed for each day. Forex Factory allows you filter events so you only see information relevant to your trading:

  • Impact – Only show high, medium or low impact events
  • Currencies – Filter by currency like EUR, USD, GBP, etc.
  • Timezones – View events in your own timezone
  • Categories – View specific event categories like GDP, interest rates, etc.

Use these filters so you focus only on market-moving events.

Understanding Impact Levels

Each economic event is categorized by its potential impact level:

  • High impact – Very likely to cause big market moves of 100+ pips if the data deviates notably from expectations. Examples: Nonfarm Payrolls, Interest Rate Announcements, GDP.
  • Medium impact – Can create above average volatility and 50-100 pip moves, but less than major news. Examples: Manufacturing PMI, Consumer Price Index (CPI), Retail Sales.
  • Low impact – Unlikely to cause much price movement by themselves. Examples: Economic sentiment surveys, jobs reports outside NFP.

Evaluating impact levels allows you to assess which events pose the greatest opportunities and risks.

Date and Time of Release

The calendar shows the scheduled date and time of the news release in your own timezone.

Having the release time allows you to prepare for the moments before and after the data is published, when volatility peaks.

Historical Data

The calendar includes historical data for previous releases, including:

  • The actual number reported
  • The forecasted number expected
  • The previous reported figure

Seeing the historical data gives context into what a “good” or “bad” number looks like for each economic metric.

Actual vs Forecast

For upcoming events, the calendar shows:

  • The consensus forecast – what analysts expect the upcoming announcement to be.
  • The actual number previously reported for reference.

If the actual number differs greatly from market expectations, it can trigger an outsized market reaction.

Now that we’ve covered how to read the calendar, let’s look at how to use it in your trading.

How to Use the Forex Factory Calendar

Here are some key ways traders can use the Forex Factory Calendar to their advantage:

Planning Your Trading Schedule

The most basic application is using the calendar to plan when you will and won’t trade based on upcoming events.

For example, if you are a short term trader who thrives on quiet and stable market conditions, you would avoid trading during the hours when major economic data is scheduled to be released.

On the other hand, if you are a volatility trader who profits from breakouts and swift price action, you would clear your schedule to be ready around high impact data drops.

Anticipating Volatility and Price Movement

Certain economic data tends to cause predictable market reactions, allowing you to anticipate whether prices are likely to rise or fall.

For example, positive GDP or employment data tends to boost the country’s currency, while higher than expected inflation is negative for the currency.

By familiarizing yourself with the typical market reaction, you can position yourself on the right side of the coming price swing. Be ready at your computer ahead of time since the markets move fast off economic news.

Of course, the direction isn’t always predictable, so manage risk appropriately.

Adjusting Your Strategy

You may need to adjust your trading strategy around economic releases.

For example, transitioning from trading breakouts to trading within ranges after volatile news announcements. Or increasing stop losses to account for larger swings.

The calendar helps you define periods of elevated vs normal volatility so you can adjust your technical strategy accordingly.

Tips for Using the Forex Factory Calendar

To maximize the value of the Forex Factory Calendar, keep these tips in mind:

Combine with Technical Analysis

Use the calendar in combination with your technical analysis strategies. For example, waiting for a breakout technical signal in the direction of the anticipated fundamental reaction.

The technicals and fundamentals together provide a robust rationale for entering trades.

Check Multiple Sources

While Forex Factory does a good job compiling events, also cross check against other economic calendars for additional events. Use sources like MarketWatch, DailyFX, Trading Economics, Bloomberg, etc.

Watch for Revisions

Preliminary data is sometimes revised in subsequent months, so news events can influence price action well after the initial release. Watch for these revisions on future calendar events.

Beware of Fakeouts

The market doesn’t always react as you anticipate! At times, the market makes a quick fakeout move, before reversing rapidly in the other direction after traders take the bait. Manage trades carefully around news events.

Example walkthrough of trading a high impact news event

Let’s walk through an example of how to trade a high impact news event using the Forex Factory Calendar:

  1. Schedule news time in your calendar – The day before, take note of the upcoming Nonfarm Payrolls (NFP) release on Friday at 8:30am EST. This is a high impact event. Clear your morning schedule to dedicate your full focus.
  2. Analyze expectations – Check the Forex Factory Calendar to see economists forecast +175k new jobs added and the unemployment rate holding steady at 3.7%. Compare to previous months for context on forecast accuracy.
  3. Consider positioning – Positive NFP data tends to boost the US dollar. Look for opportunities to go long USD currency pairs when volatility settles after the number hits.
  4. Prepare your platform – Make sure your trading platform is open ahead of time with USD pairs loaded. Volatility spikes fast at 8:30am.
  5. Manage risk – Use wider stops and smaller position size to account for the potential whipsaws. Have a stop loss strategy for both upside and downside reactions.
  6. Wait for entry signal – When NFP hits +225k new jobs, much higher than expected, USD spikes higher across pairs as anticipated. Look for pullback retracement on 15 minute chart to enter long per your technical system.
  7. Trail stop – After entering long, trail your stop loss up under support as USD continues trending higher over the next hours. Exit for profit once momentum stalls.
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Careful planning and preparation allows you to profit from the predictable opportunities around economic calendar events!

FAQs about the Forex Factory Calendar

What are the most important news events on the Forex Factory Calendar?

The most market moving events to watch are:

  • Interest rate decisions – Federal Reserve, ECB, Bank of England, etc. Can cause huge swings in currencies.
  • Employment data – US Nonfarm Payrolls, Unemployment Rate. Drives currency pairs with USD.
  • GDP – Gross domestic product data. Economic health indicator.
  • Inflation – CPI, PPI. Higher inflation boosts country’s currency usually.
  • Retail sales – Consumer strength indicator.

Always check impact level as even medium impact events can sometimes spur big reactions if the data surprises notably.

How early before a news event should I close trades?

It’s best to close out existing trades at least 30-60 minutes prior to major economic data releases. While not always the case, the biggest whipsaws and reversals often happen in the moments leading up to the data hitting the market when speculation is highest. Better to sidestep this unpredictability by flattening out positions.

Should I avoid trading during medium impact events?

It depends on your strategy and risk tolerance. For short term traders looking for quiet conditions, it may be best to step aside completely when anything over low impact events hit.

But for breakout traders who thrive on volatility, medium impact events can still provide enough movement to capture profits. Just use wider stops and position sizing.

Can I automate a trading strategy based on the Forex Factory Calendar?

Yes, it is possible to code an automated trading strategy triggered by economic calendar events, based on time and expected impact.

However, execution still requires finesse to capture events accurately, filtering out noise and false signals. Manual oversight is still recommended when trading off economic news.

Is the Forex Factory Calendar accurate?

Forex Factory takes care to compile the calendar information correctly and keep it updated. However, economic agencies can change scheduled event dates and times, so always verify against multiple sources. Generally the calendar is about 95% accurate.

Is there a better economic calendar than Forex Factory?

Forex Factory is quite comprehensive and user friendly, making it a top choice of most forex traders. But also cross check against Bloomberg, DailyFX, Trading Economics as they may surface some alternative events not listed. Use Forex Factory as your primary calendar, but verify with others too.

Conclusion

The Forex Factory Calendar provides tremendous value to forex traders by highlighting upcoming opportunities and periods of elevated volatility. Learning how to efficiently read and leverage the calendar can give you an edge over other traders.

Use this guide to understand all the details presented on the calendar, how to interpret them, and strategies to trade around impactful economic events.

Combining fundamental news from the calendar with your underlying technical system can really optimize when and where you take trades. Pay close attention and the Forex Factory Calendar will steer you towards the best trading situations!

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About Amelia Clarke

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