Volatility arising from currency pairs such as the euro against the U.S. dollar after major employment data such as U.S. non-agricultural benefits are released can lead to large movements and price differences. For example, if the price differs by about 50 pip, it means that there is no liquidity within the range of 50 pip and that you cannot stop trading or start a new transaction for the time being.
It can be dangerous if transactions are open during major economic or geopolitical news announcements. High volatility can occur within seconds of these news events.
Before economic data is released, analysts try to predict the results and consensus estimates are formed. High volatility can occur if the data are very important and the reported value is significantly different from the estimate.
Learn how to use an economic calendar.
At the beginning of each trading week, the impact icon next to the event name should be used to check the economic schedule for future high impact and intermediate impact events. High impact events use red icons and intermediate impact events use orange icons.
The “impact” value on the calendar indicates the possibility that the report may affect the market. If the data published in the economic report differ significantly from what was predicted or expected, the impact can be realized. Otherwise, if the data matches expectations, it may have little impact on the report.
Traders generally check the upcoming economic events on the calendar for one of the two reasons. The first is to avoid open transactions during potentially high volatility. The second is to use volatility to find good entry and exit points in new or existing transactions.
In most forex economy calendars, you can see the important values below.
Previous Month Value – Displays the result of the previous month. It can be changed because the previous month may be adjusted. This surprise can cause volatility.
Predictive or comprehensive values- Displays predictions based on the economic analysts agreement.
Actual Value-The actual report value can be displayed and the cause volatility can be shifted if it is significantly different from the prediction.
Impact- The magnitude of the potential impact on the report is indicated by a color icon next to the event name. Red means high shock and orange means medium shock.
Check your economic calendar frequently to make sure you always know about upcoming events.
