Forex Factory: Six Steps to Make a Profit!
Forex Factory is probably one of the best calendars available to retail traders. This post will help you to understand how to use this tool in your trading.
The calendar itself identifies all of the economic announcements that are due to be released throughout the month. It helps to determine which announcements will have the most impact on the markets; and what traders are expecting from those announcements.
So how can you use Forex Factory to actually make some profit?
1. The first thing is to focus on those announcements that can make a high impact on the markets. These are what will cause moves worth trading.
2. After identifying all of the high impact announcements for the day, the next step is to simply monitor the expected number and how that relates to the released number. It is this possible deviation from expectations that holds all of the potential.
3. The calendar itself gives a handy description of each announcement and how the possible deviations will impact the currency of the country in which the announcement is being made.
4. Next, you need to determine what the expected effect on the price will be, should the number come out better or worse than expectations. If for example, the number is better than expectations, then traders will want to buy more of that currency and if the news is worse than expectations, traders will be looking to sell it.
5. Once you see the news and you have your deviations you will then have a very good idea about the short term sentiment for that currency, and can look for trading set-ups that correspond with that sentiment.
6. If the news brings a bullish sentiment, make sure that the next signal you take is a long trade. And vice versa for bearish sentiment.
Adhering to these simple steps will protect you against false moves and those seemingly random times when the price just blows your trade out for a loss with a sharp move. Deviating news events cause most of these ‘random’ moves. That is why keeping a close eye on them can pay off.
With time, you will become proficient at following these economic announcements and predicting their impact on the markets. And it will only improve your trading results in the long run.