3 Strategies for Trading the Economic Calendar

Sameer Khan — Tue, 15 Sep 2020 06:11:32 +0000

The economic calendar is a fantastic tool to understand what is going on in the markets, but how do you take advantage of it to make more profitable trades? Here are 3 strategies you can use to make winning trades using the economic calendar.

Most traders understand how economic news affects nearly all the trading markets in one way or another. Using data released by the variety of government and private sources on the state of the local, national, and global economies empowers traders to make informed decisions.

However, many traders aren’t exactly sure how to transform their knowledge into making better profits on their positions. If you’re not familiar with the economic calendar or its functions, check out our informative guide. Fortunately, Techysquad clients get free access to a customization economic calendar.

Here are 3 proven strategies on using the Economic Calendar to make more money.

Trade the Most Liquid Markets with Non-Directional Bias:

The markets with the most liquidity are those that are traded the most often and with the most volume. The major indices like the Dow Jones, NASDAQ, S&P 500 are good examples, but also the major currency pairs like EUR/USD, GBP/USD, USD/JPY, USD/CAD, AUD/USD, and USD/CHF.

You’ll notice that all of these markets involve the U.S. dollar. The reason for this is that the U.S. dollar is the “reserve currency” for most of the world. The U.S. is also the largest economy in the world, but that isn’t the real point.

The key is that these markets have the tightest spreads typically. When news or reports are released that affect these markets, the reaction in the marketplace is more pronounced, which provides more possibilities to profit of the action.

Key data releases like U.S. unemployment, GDP, U.S. Federal Reserve (Central Bank) decisions, wars, disasters, etc. are going to adversely affect these markets most significantly in terms of movement outside their norms.

Fresh trends are often started on the release of news based on the economic calendar, even if these trends are only for a short period of time. Therefore, traders have an opportunity to grab a ride on the new trend and exit profitably shortly thereafter.

The key is keeping up to date on new economic data and news stories so that you are ready to go when the time comes and take advantage.

Straddling the Market

Straddling the market is another non-directional strategy that lets traders set up positions in certain markets ahead of time based on data that is to be released off the economic calendar.

In this situation, a trader looks at the time and date for key data to be released and then studies the charts of the affected assets to determine their typical trading price channels. The closer to the actual release of the news, the more accurate the price ranges will be.

Let’s review a fictional example of how this is done. The U.S. Federal Reserve is due to release its decision on whether to lower interest rates or not. Most people agree that they are going to actually lower them, but some people have questioned the reasoning behind such a decision.

We don’t know exactly what they will do and how the market will react. So, we look at which markets will be affected by such a decision. These would be USD currency pairs, the major U.S. indices, etc.

For our example, let’s look at the Dow Jones Industrial Average and see how we would set up our “straddle”. In this 15 minute chart, our 10 period EMA is staying in the range of 27932 and 27940.

With the current price at 27936.5 and our news about to be released, we would set our short term targets at the green lines (27932 and 27940). We set a Buy position at the upper end (27940) and a Sell position at the lower end (27932) and our Stop Loss point at 5% for Forex plays.

The post 3 Strategies for Trading the Economic Calendar first appeared on Ivision Market.

US Data Weakness Hits USD

Sameer Khan — Mon, 14 Sep 2020 06:18:02 +0000

USD Lower on Data Weakness

The US dollar has come back under pressure over the last 24 hours as further data weakness has weighed on sentiment. The ISM Non-Manufacturing reading was weaker than expected over November at 53.9 vs 54.5 expected, though at least remained in expansionary territory. The ADP employment change reading was also weaker than expected. Data came in at 67k jobs vs 137k expected, raising the risk of a weak reading in Friday’s NFP release. USD index trades 97.47 last.

EURUSD Higher on USD Weakness

EURUSD has been higher over the European session so far on Thursday as weakness in the USD allows for recovery in the single currency. In light of recent data weakness and comments from ECB’s Lagarde (who said the ECB remains committed to achieving its 2% inflation target), the outlook remains bearish for EURUSD. Currently trading 1.1091 last, and approaching the bearish trend line from mid-2018 highs.

GBP Breaking Out

GBPUSD continues to forge higher ground today after breaking out above the 1.3033 resistance. The latest UK elections polls show that the Conservative party remains in the lead with around a 10% lead on Labour. For now, price action seems to reflect the view that elections outcome will either result in Brexit being delayed further or Johnson’s deal being pushed through, keeping GBP supported for now.

SPX500 Recovering Well

Risk assets have continued to recover into the back-end of the week following initial weakness in response to concerns over US/China trade talks. The SPX500 has traded back up to 3117.53 today, recovering firmly off the 3069.48 lows. The recovery has been helped by a Bloomberg report suggesting that a US/China trade deal is still close, despite recent tensions over Hong Kong. This report comes after Trump spooked markets by suggesting that a deal might not come until after the US elections next year.

JPY & Gold Lower

Safe havens have been weaker today, in light of the ongoing recovery in equities prices, seeing both JPY and gold lower against the US dollar. USDJPY trades 108.94 last, still above the 108.84 level for now. XAUUSD trades 1474.60 last, down firmly off the 1500 level.

Market Flash

AUD Down on Data Dump

AUDUSD has been lower today despite the pick-up in risk appetite and recovering optimism over a US/China trade deal. Data overnight showed a weaker than expected retails sales print for the last month as well as a far smaller-than-expected trade surplus of just 4.5 billion AUD (vs 6.5 billion AUD forecast). AUDUSD trades .6833 last.

The post US Data Weakness Hits USD first appeared on Ivision Market.

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