One of the easiest ways to determine the performance of an asset is to examine global events. An economic calendar is simply a sequential record of how an asset has historically behaved in response to economic or political events globally.
Tips for Using an Economic Calendar in Binary Options Trading
An economic calendar will typically indicate the asset type, the concerned event and changes in the price of an asset in response to the event. Using this calendar, a trader can gain a basic understanding of how an asset reacts to certain data and thus make future predictions on the performance of the asset.
A good, high-quality calendar will indicate when significant global events will occur and the possible impact these events will have on the financial markets. So, if Toyota is set to release its quarterly revenue growth, the economic calendar will show you when the release will occur, time and the anticipated market reactions.
What’s included in an economic calendar?
Economic calendars feature a wide variety of indicators that could impact the price movement of an asset. Common indicators used in the calendar include trade balance, interest rate, consumer price points, data on the manufacturing industry, unemployment rate etc. All the factors that affect the performance of the overall economy are usually included in a reliable economic calendar.
A major advantage of using the economic calendar as a tool of fundamental analysis is that you can accurately predict price movements regularly, against a constantly fluctuating financial market.
How to practically use an economic calendar in binary options trading
The first step to utilizing the economic calendar is to identify any major data released about the particular assets you want to trade.
Next, examine the changes anticipated by analysts and compare these predictions to the actual numbers in the financial market once the expected data has been released.
Note that if the actual numbers in the financial markets significantly deviate from analysts’ predictions, it would be appropriate to enter a trade according to the prevailing price conditions. If the actual numbers concur with analysts’ predictions, a CALL option position would be appropriate. The opposite is true — PUT trades would be appropriate when the actual market goes contrary to analysts’ predictions.
Sometimes, an asset can set off a completely different price trend that suddenly deviates from market expectations. Traders stand to really benefit from these large and sudden price shifts because trading binary options means you can benefit whether the price moves up or moves down. An economic calendar will be particularly useful in helping to predict a possible start to a price trend.
Basic economic calendars will usually not include technical indicators but advanced calendars, suitable for advanced traders, will feature technical indicators alongside fundamental indicators for traders to make accurate trade decisions based on the anticipated price movement of an underlying asset.
Admittedly, basing your trading decisions on major data releases can be significantly risky due to the heightened market volatility. What’s really important to consider is what the market’s reaction will be if the analysts’ predictions are higher or lower than the actual market numbers. Anticipating the market’s reaction before making a trade move will help in mitigating potential risks.