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10 - Learning The Event Calendar

This document discusses the importance of understanding economic event calendars and news releases for forex trading. It provides examples of common types of economic data releases such as CPI, retail sales, GDP, and central bank minutes. The document emphasizes preparing for how the market may react to different potential outcomes of these releases. Two simulations walk through examples of trading around economic news releases. The overall message is that understanding news events and having a trading plan for various scenarios can provide trading opportunities but also requires remaining unbiased and aware of how other traders may react.

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collegetradingexchange
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© Attribution Non-Commercial (BY-NC)
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Download as PPTX, PDF, TXT or read online on Scribd
55 views

10 - Learning The Event Calendar

This document discusses the importance of understanding economic event calendars and news releases for forex trading. It provides examples of common types of economic data releases such as CPI, retail sales, GDP, and central bank minutes. The document emphasizes preparing for how the market may react to different potential outcomes of these releases. Two simulations walk through examples of trading around economic news releases. The overall message is that understanding news events and having a trading plan for various scenarios can provide trading opportunities but also requires remaining unbiased and aware of how other traders may react.

Uploaded by

collegetradingexchange
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 13

FOREX:

LESSON THREE
Understanding the Event Calendar In Depth for better
planning and risk management

The Trading Pitt 2010 1


TERMS TO
KNOW:

• Balance of Payments – A method for a country that attempts to


account for all assets/liabilities that they encounter and should
“theoretically balance”
• Capital Account – Accounts for capital inflows and outflows over a
designated period of time
• Current Account – Is equal to Exports – Imports + Income Abroad +
Transfer inflows
• Hawkish – Tighter Monetary Policy and higher interest rates
• Dovish – Looser Monetary Policy and lower interest rates and
sometimes quantitative easing

The Trading Pitt 2010 2


THE IMPORTANCE
OF NEWS EVENTS

• Long Term and Short Term


• Your Opinion Doesn’t Matter, Nobody
cares, and you need to follow the
market
• Eliminating Biases and Gambling from
your trading and how you interpret the
releases
• Watch out for the news algos at work
– They will react before you can read
and process it
• Actual is not only important to absolute
number but also expectations

The Trading Pitt 2010 3


UNDERSTANDIN
G THE TYPES OF
EVENTS PART

• CPI – High Inflation often leads to currency strength as traders anticipate a central banks response will
be to raise rates. However at the same time inflation should lead to a devaluation of the currency.
• Retail Sales – Bullish if strong and bearish if not, this varies in importance from country to country.
• Industrial Production / Durable Goods – For the large exporting and manufacturing countries like
Germany (i.e. Euro) and China strong numbers and orders are the result of strong demand and in some
cases capital inflows.
• Confidence/Sentiment – A lagging indicator of how a random survey feel about the economy. In risk
on/off regimes this becomes very important.
• Employment – Another lagging indicator that often causes big reactions because markets which tend
to anticipate have to now react to what they tried to anticipate
• Gross Domestic Product – A measure of the all the total goods and services produced in a country
• Central Bank Minutes – Contains specific language about the economy that often in
• Purchasing Managers Index – A survey of certain purchasing managers for large corporations on how
optimistic they are on the economy which is an indication on how much they will be spending going
forward
• Debt Auctions – Where the government usually using Dutch auctions takes orders for on the run
government bills, notes, or bonds
• Political Factors – Elections & major changes can cause temporary instability but long term
• Housing Data – For some economies housing factors more into the general economy.

The Trading Pitt 2010 4


USING THESE • These releases do tend to get leaked and
EVENTS it is not illegal to trade in advance of
them, unlike insider trading.
– You can sometimes see strength or
weakness ahead of an event
– But as retailers you will never know
• Markets tend to value certain events
more at particular points in time and
these tend to vary
• It becomes critical to take detailed notes
on events if you tend to have more of a
fundamental focus or really want to
zone in on the mindset of the market

The Trading Pitt 2010 5


SIMULATION 1 GDP is coming up, please place your
bets before the release
JULY 30TH,
2010

The Trading Pitt 2010 6


KEY POINTS Quick Reaction and then a reversal fill.
FROM
SIMULATION 1

The Trading Pitt 2010 7


TRADERS
PSYCH

• If you do plan to trade post news events you must know the
critical levels in advance and pay less important
• Try doing a visualization exercise for all scenarios before the event
and mark the chart both physically and mentally
– It is possible to get some nice setups in certain scenarios with
good preparation

• “Failing to prepare is preparing to fail” -John Wooden

The Trading Pitt 2010 8


SECOND Another Release except now trade
SIMULATION after using some of our intraday skills

JUNE 4TH,
2010

The Trading Pitt 2010 9


KEY POINTS Market was completely wrong and
SIMULATION 2 this is where money was to be made

The Trading Pitt 2010 10


RANDOM WEEK More Practice planning for both scenarios,
PRACTICE knowing the inflection points, key levels
SIMULATION GBP CPI

JULY 12TH, 2010

The Trading Pitt 2010 11


ANALYSIS, What were the best plays?
COMMENTS, Were there any clues in the price action
QUESTIONS?

The Trading Pitt 2010 12


WHAT TO
LOOK OUT
FOR THIS
WEEK:

The Trading Pitt 2010 13

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