Trading Around the Economic Calendar

Everything in this track becomes practical at one moment: Sunday evening, or whenever your week starts, when you look at what is scheduled and decide in advance what you will do about it. The alternative — being surprised by a release you could have looked up — is the most avoidable loss in trading.

Reading a calendar and its impact ratings

An economic calendar lists scheduled releases with a time, a country, a previous value, a consensus forecast and an impact rating. Most of that is useful and the impact rating is the part to treat carefully.

The ratings are assigned generically and do not know what the market currently cares about. In an inflation-led regime, a mid-rated wage figure can move more than a high-rated GDP print; when recession is the worry, the ranking inverts. Lesson 5's test applies: whichever category moved the market most in the last few release days is what is currently high impact, whatever the calendar says.

Building the week

1. Set the calendar to your own time zone. Once. Most mistakes here are arithmetic.
2. Filter to the currencies you trade. A EUR/USD trader needs the euro area and the United States, not all of them.
3. Filter to high impact, plus anything mid-rated that the current regime has made important.
4. Write the resulting list somewhere you will see it — day, time, event. Usually three to six entries.
5. Mark the two or three you will not trade through.

Consensus, actual and prior

Three numbers per row, and the relationship between them is the whole point.

• Prior — last period's reading, and check whether it has been revised.
• Consensus — the median of economists' forecasts. This is what is priced, approximately.
• Actual — the release.

The move comes from actual against consensus, not from actual against prior. Inflation falling from 3.4% to 3.1% sounds like good news and is a hawkish surprise if the market expected 2.9%. A trader comparing with last month reads it backwards.

Deciding before, not during

For every release on your list, one of three decisions, made in advance and written down:

All three are defensible. What is not defensible is deciding at 14:28 for a 14:30 release, because by then you have an open position and a preference, and the decision will be made by the preference.

A default worth adopting

1. Flat through rate decisions and the employment report. These reprice paths, and their direction depends on wording nobody has read.
2. Hold through medium-impact data, if the position is sized for the gap.
3. Trade after, not during, unless event trading is your explicit specialty with the infrastructure to match.

"Trade after" is more useful than it sounds. The first move is frequently reversed within minutes, and the direction that survives thirty to sixty minutes — once the components have been read and spreads have normalised — is both more reliable and available at a sane price.

Size and stops around a release

If you do hold through, the arithmetic from Track 5 has to be redone, because your real risk is no longer your stop distance.

• A stop is not a guarantee. It becomes a market order when triggered, and in the seconds after a release it fills wherever liquidity is.
• Assume a gap. 10 to 30 pips through the stop on a major is ordinary around a high-impact release; much more on a rate decision or a cross.
• Size on stop distance plus the expected gap. A 30-pip stop with a possible 30-pip gap is a 60-pip risk, so the position should be half what it would otherwise be.
• Widen the stop rather than tightening it. A tight stop into a release is not less risk; it is a near-certainty of being taken out by the initial spike that then reverses.

A worked adjustment

That is the whole discipline. The risk did not change because it was never allowed to — the position absorbed the difference, exactly as it does for a wider stop or a more volatile pair. A calendar is a risk-management document before it is an analysis one, and used that way it removes a category of loss without requiring you to predict anything at all.