Don’t waste your time – keep track of how NFP affects the US dollar!
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Fundamental factors are not an abstract concept. Traders face them daily in the form of economic news, published in the Economic Calendar.
Let’s take a look at the economic calendar. For each date, you can see a list of scheduled economic releases corresponding with one of the major Forex currencies. Pay attention to the release time: make sure to make adjustments for your time zone. You can see that all events have a different impact: the higher this impact is, the stronger move of the market is expected, so you can focus on the most important events.
Most news in the Calendar represent economic indicators and have numerical values. The previous reading is available in advance. The forecast is the median forecast of 20-240 economists surveyed by big agencies like Bloomberg, Reuters, etc. The actual reading is published by an official source (the nation’s statistics agency or an analytical center).
For most indicators, if the actual reading is higher than the forecast one, it’s positive for the currency in question. Unemployment indicators are the exception: the lower the reading, the better it is for the currency.
By the way, there are different ways to use the economic calendar. Some market players ‘trade the news’. It means that they open positions in accordance with their expectations for a change in economic indicators (for example, eurozone GDP is expected to improve – we buy the euro). Others, on the contrary, avoid the news as trading them is associated with risks of too rapid price movements. Such traders prefer to wait until the market ‘digests’ the news and enter the already shaped trend.
No matter what strategy you choose, we strongly recommend you follow the news in order to be aware of the market moving impulses. Some data releases increase volatility and cause sudden moves on the market. The best example is the US nonfarm payrolls (NFP). The release of this indicator may lead to the unexpected closure of your position under a stop-loss order.
