There are plenty of forex traders who trade based on technical analysis only and tend to forget about economic reports which are heavily anticipated by those few who trade based on fundamental analysis or just try to trade the news. As a technical trader it is still important to know when economic news are released.
The reason being is that the release of an economic report will, at least in the short term, impact price action and distort the charts by creating spikes and new technical traders often see their stop loss orders triggered and are forced to accept unnecessary losses.
What should technical traders know about an economic report?
- Which economic report is released – Know which report is being released as not every report carries the same weight; some reports such as employment reports, GDP and inflation reports carry much more weight and will influence the charts much more than smaller and less significant reports such as auto sales and consumer confidence reports.
- Which country releases the economic report – It is very important to know where the report is coming from so you know which currency pairs will be impacted by the figures. Make sure you account for all currency pairs impacted regardless if the currency pair is the base currency or quote currency.
- When is the economic report released – This is very important as you need to be prepared for price swings in either direction as the numbers are being released. This will often explain unexpected candlestick formations in your charts.
A lot of technical traders tend to forget about certain economic reports and while their technical analysis may be correct are forced out of trades by price swings caused from an economic report or miss better entry as well as exit opportunities because they did not account for the impacts of an economic report.
Here is a great way to limit the impacts of forgotten economic reports
- Use your favorite calendar application as there is no excuse not to have one. Most traders use Windows as their operating system and Windows does offer their Windows Calendar which is a great start for this. Alternatively there are plenty of calendar and reminder application our there free of charge which can be used. There is no need to spend money for this purpose.
- Over the weekend take a look at an economic calendar and familiarize yourself with all the reports which are being released during the trading week. Determine which are important to your forex trading and how they could impact price action.
- Now enter all the economic reports which will be relevant to you into your calendar and don’t forget to enter them at the correct times otherwise they will be useless to you.
- Set reminders for the release of the economic reports, preferably 15 minutes to 30 minutes before the report is released. This is the most important step. You will get a pop-up on your screen which will remind you which economic report is being released and you will know which currency pairs will be impacted.