Forex Factory has been among the most popular forex forums for many years and it includes one of the better calendars that are available to retail traders. Here, I want to discuss a little bit about how you can use Forex Factory as a tool in you trading.
So can you use Forex Factory’s calendar to actually make a profit in the Forex market?
1. First, you need to focus on the announcements that have the potential to make a high impact on a particular market. These are what will be the cause of any moves that are worth trading.
2. Once you’ve identified the high-impact news events that will occur on a given day, you’ll need to monitor the expected numbers and how they relate to the actual number when it’s announced. It’s the difference between these two numbers that holds the potential for a sizable move.
3. Pay attention to the calendar’s description of each news event and how the announcement will impact the currency of a given country when the news is released.
4. The next step is to determine what the expected effect the news will have on the currency. For example, should the news bet better or worse than predicted, what will occur? Not surprisingly, the better the news, the more traders will want to buy a currency pair up, and conversely for negative news.
5. Once the news is released and you can see whether the news was bullish or bearish, and you can see the anticipated numbers vs the actual numbers you’ll have a very good idea about the short term sentiment of a forex pair, and you can begin to look for trading opportunities that reflect your sentiment.
6. This should go without saying, but if the news brings bullish sentiment, trade long only. If it’s bearish, only go short.
Keeping these 6 steps in mind will help to protect you against false moves and those ‘random’ times when price completely blows your trade out for a loss with an explosive move.
With practice, you can become skilled at following these economic announcements and reacting to their impact on the markets.
Source: Vantage FX Blog