fundamental analysis: the economic calendar

Question 1

what is the economic calendar

Answer 1

The economic calendar covers all important fundamental events and releases that affect the forex market

You can see how a particular sector of the economy of country is doing.

will help you structure your fundamental idea.

Question 2

what does “Previous” mean in the economic news?

Answer 2

Previous result from last data (usually last month)

Question 3

what does “consensus” mean in the economic news?

Answer 3

General agreement

prediction from analysts

Question 4

what does “actual” mean in the economic news?

Answer 4

Actual number that is released at the announced date and hour

Real number

Question 5

what are the two parts of a market’s reaction after an actual number is released?

Answer 5

part 1: the storm

part 2: the calm

Question 6

what is the duration of the storm after actual numbers are released?

Answer 6

As soon as the actual is release until a few minutes afterwards

could be 5-30 minutes, depending on the news

Question 7

what are the characteristics of the storm after actual numbers are released?

Answer 7

Market is impulsive, emotional and under the effect of surprise.

Question 8

who is trading when actual numbers are released?

Answer 8

Automatic bots from financial institutions/hedge funds

noob retail traders

Question 9

what are the 3 questions we have to ask ourselves when a storm is happening?

Answer 9

1. Is the Actual a surprise or not relative to the Consensus?
2. If it’s a surprise, is the surprise positive or negative?
3. On a scale of 1-3, how surprisingly positive or negative is the Actual?

Question 10

when asking the following question: “On a scale of 1-3, how surprisingly positive or negative is the Actual?”, which criterias influence the score?

Answer 10

1. We will look at the importance of the news (Medium or High impact).
2. Look at the difference of numbers between the Actual and Consensus, is it a slight or large difference.
3. Verify and compare the historic data of the last 3-6 months on the economic calendar chart to confirm criteria #2.

Question 11

what is the duration of Part 2: The Calm after actual numbers are released?

Answer 11

Right after the end of the first part (The Storm) until a few hours afterwards

Question 12

what are the characteristics of Part 2: The Calm after actual numbers are released?

Answer 12

Market is rational, thought out and planned out

Question 13

who is trading in Part 2: The Calm after actual numbers are released?

Answer 13

Manual traders from financial institutions/hedge funds

professional retail traders.

Question 14

what are the three questions we ask ourselves to understand how the market is going to react to part 2: the calm?

Answer 14

1. Is the Actual versus the Previous positive or negative?
2. Do we arrive at the same conclusion as the first reaction in the second reaction (are both positive/negative or opposite)?
3. How are the financial institutions going to interpret the situation and act? 3 possibilities

Question 15

How are the financial institutions going to interpret the situation and act? 3 possibilities (in the part 2: the calm)

Answer 15

1. If we arrive at the same conclusion for Part 2 as we did for Part 1, we will have a continuation of the first movement.
2. If there’s a slight difference between Part 2 and Part 1, the market will become uncertain and the price will start consolidating.
3. If Part 2 is the complete opposite of Part 1, the market is going to reverse the first movement.

Question 16

what are the 3 reasons we use the economic calendar?

Answer 16

1. If the news is really, really, really important and you have experience you will be able to trade the second reaction (Part 2)
2. By looking at the economic data, we accumulate information that will help us form our fundamental idea later on (Most Important)
3. By looking at the economic calendar, we have a sense of the importance of different news and we can protect/adjust our current trades (exit the trade or take partial profits).