How to use Economic Calendar in binary options trading? We get this question a lot from subscribers and new members. This article will serve a good reference on what reliable sources to use, what to look for on the calendar and most importantly, how to consider this in the binary options trading. Before we deep dive, let us clarify this. It is not just the Economic news that matters but the traders/people’s reaction to the news is what impacts the price of the stock or assets. Very important distinction! We will go over examples later in this article so this point drives home and understood well.
In Forex and Binary Options, Economic Calendar is THE Bible. Trading without knowing the world events is like shooting oneself in the foot (=losses!). If you are a new binary options trader, we are glad you stopped by at the right place. We will equip with everything you need to know to be successful in trading binary options. Anyone considering to register with an auto trader, knowing about economic news and how to read the news is more imperative. Read this post to its entirety prior to turning the auto trader “on”.
What is Economic Calendar?
So you ask “what is economic calendar? And why on God’s green earth would I need to care?”. Excellent question. In Forex and Binary Options, currencies are inflated or deflated in value every single day. Purely based on legislation, political events, financial events, and upcoming trend in the market. Based on the anticipated and project results of several economic factors, the market fluctuates in price leading up to the announcement date/time. Keeping tabs on the news and understanding the projected outcome will help stir your trading results for that period.
Reliable Economic Calendar Sources
While there are various websites and sources for reference, we primarily consult 2 websites – Investing.com and ForexFactory.com. Both these are raw data, in fact, all the sources are raw data feed from various financial institutions. These data by itself do not mean anything or have any implied value to it. We will cover more in the examples below.
We consult two sources in case there are additional data that one source might not cover. Investing and Forex Factory have been complementary in the news coverage. One covers if the other doesn’t and vice versa. So always consult two or more to validate news.
Setting up TimeZone in Economic Calendar
The first thing to do in Economic Calendar is to sync up the timezone – either local or GMT timezone whichever you use for trading. Missing this step would mean, referencing the news at the incorrect time, could be the past or future event. Once the timezone is set, all news times seen on the site will now reflect that timezone. In the following screenshots, the timezone used is GMT. Personally, we set all the device, trading platform and other application timezones set to GMT during binary options trading hours. It is common practice in the trading community to refer to GMT with regards to signals or any news.
Forex Factory setup
How to Identify High Impact News?
The next step is to look for Economic news. We look to avoid high impact, high volatile news since the price is quite unstable during that time unless your trading strategy calls for such market conditions. In most cases, if using automatic trading or stable price movement strategies, then avoid trading before, during and after these high/med impact news.
Investing.com 3-bulls pattern
Forex Factory Red Icon
3 Bull pattern and Red Icon are identified as high impact news. The currency impacted is listed next to that pattern/icon in the news. We avoid trading that impacted currency pair 15-30 mins before the news, during, and an hour after the major news. You can continue trading that currency or currency pair after the news period. [Exception:] We are conservative traders. One exception that we make is if the currency news is related to USD, EUR or GBP, we avoid trading these if the news is medium impact news. USD, EUR, and GBP are considered heavy hitters hence has rippling effects. We play it safe when it comes to money and trading.
In the above example, the news data in the Investing Economic Calendar indicates that at 14GMT, US has a pending news about “Pending Home Sales (MoM)”, a high impact news by the 3-bull indicator. Starting at around 13:30GMT, we avoid trading any currency paired with USD until 15GMT. Examples of such pair could be – EUR/USD, USD/JPY, USD/CHF, USD/CAD, etc. For an advanced trader or those who are trading volatile market, knowing the Actual, Forecast, and Previous data columns would provide additional insight into how the currency would play out. In this case above, the Previous data is 1.4%, Forecasted 0.6%. The analysts are anticipating a decline in April Home Sales results. That is the set expectation! At 14GMT, if the actual news is below or above 0.6% there will be a reaction to the USD price. Note: It is not the news itself that brings the price movement. It is the reaction to the news and “Actual” data that causes the traders to respond emotionally, indicating an optimistic or “fear” of future outlook.
After 15GMT, it is wise to check if USD price reaction has died down, so this currency could be traded again. Another resource to use is FreeStockCharts.com. Check the EUR/USD chart for any unusual trend before entering the market again or turning the auto trader “on”.
Avoiding medium impact news for USD, EUR, GBP currencies is an additional layer of precaution, those who choose to take a conservative approach. In the example above, at 16GMT US has a medium impact news where U.S. Federal Open Market announcements are made. Some news in the event could have implied impact to the economy. This could be a hit or miss type of news.
Other Blogs on Economic Calendars
There are other traders using Economic calendars, maybe different than our strategy. It is good to consult several blogs and see what strategies and methods resonate with you. Check out ForexTradingChannel for valuable insights. Besides economic news, another critical element is Money Management Strategy that would make-or-break your portfolio at the end of the day.
Let us part this article with an analogy. Just because a person owns a car (=auto trader or trading tool), needs to get to a destination (=make money) cannot run through the red light (=not watching for economic news) without consequences (=losses!). Please use the trading tools responsibly! We hope that this post has provided insights, valuable trading tips to save potential future losses. Before you go, check out the best trading systems, test and vetted out from all the binary options scam systems.
[Optional] Economic Indicators – Advanced Traders
Economic indicators are more technical in nature for the advanced traders who would like to keep an eye on. They reflect the supporting data to analyze the trends of how well a country is doing.
Some of the most common and followed U.S. Economic Indicators:
- Consumer Price Index (CPI).
- Real Gross Domestic Product (GDP).
- Employee Cost Index.
- Consumer Confidence Index.
- Employment Situation Report.
- Housing Starts.
- Fed Index.
- Durable Goods.