The economic calendar should be closely monitored by every trader. As we’ve talked in our previous material, technical analysis is now in the center stage, but combining it with the fundamental analysis could give you an edge and help you generate higher profits.
Why monitoring the economic calendar is so important?
No matter what type of trader you area, monitoring the economic calendar can help you avoid unexpected moves in the market and not being surprised by any sudden reversal of the trend. By constantly monitoring the economic calendar, you will have a better picture of the underlying forces that move the markets and shape the trends.
One the most commonly used strategies used in trading are the breakout strategies. Trending environments are more profitable than the ranging ones, so traders develop their strategies in order to exploit that type of environment.
We’ll talk more about breakouts from a technical point of view in a future article, but for now let’s focus on their fundamental aspects.
What every beginning trader needs to understand is the fundamentals break support/resistance levels. If the economic conditions won’t change at all, the markets will probably be little changed all the time. The economic development (or contraction) influences the order flow and makes in biased on one side (bullish or bearish).
Without an in depth look at the economic calendar, you won’t be able to understand those shifts in the market and you might be caught up sometimes on the wrong side of the market.
Another key thing to mention is that technical setups tend to perform worse when they appear around the release of an important economic figure. That usually happens because the setup was generated by a low liquidity environment since the institutional traders always wait until they economic figure is released, do not gamble before that.
To sum up, the economic calendar can have a positive or negative impact on your trading strategy. We recommend finding a way to incorporate it in your trading regime as it could help you avoid being trapped in some nasty situations. We’ll talk about how you should trade the economic calendar in a future material.