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The Forex Factory Calendar available at forexfactory.com is by far the most user-friendly and accurate economic calendar to keep track of Forex-related news events. By the end of this tutorial, you will know how to use the forexfactory calendar as well as how to read it in a way that is beneficial to your trading. PLUS, a profitable news trading strategies based on news released by forexfactory.com
But before we get into the details, we want to dispel a common misconception.
Many technical traders make the mistake of thinking that, because they take a technical approach to the market, they don’t have to pay attention to forexfactory news events.
While it isn’t necessary to study the news, it is advantageous to know when the forex news is expected. This is especially true for heavy-hitting news that can adversely affect the market. Not only can this type of news affect an open position, it can cause slippage and gaps that can wreak havoc for pending orders.
Here’s what you’ll learn from the definitive Forex Factory guide:
The very first thing you want to do is navigate to the Forex Factory calendar available at forexfactory.com or right inside the trading platform MetaTrader 5 AM Broker. Once there, you should be presented with a screen similar to the one below.
Don’t be intimidated by all of the activity on this page. It will all make sense by the end of the tutorial. Next, we will begin configuring the Forex Factory calendar so that you can get the most out of it.
Now that you’re on the Forex Factory calendar tab, you will want to set your time zone. To do this, simply click the time in the upper right-hand corner.
After clicking the time stamp, you will be taken to a page where you can set your time zone. This will synchronize the time for each news event with your local time.
Note: Setting the correct time zone is extremely important. If not set, it will be difficult to determine the correct time for each news event.
At this point, you also have the option to turn Daylight Savings Time (DST) on or off. Lastly, you can toggle the time format to show either am/pm or 24 hours “military time”.
Once you are happy with the settings, click “Save Settings” so that you won’t be required to do this each time. As long as your browser’s cache is not cleared, your settings will remain the same each time you revisit this page.
After saving your settings, you should now see the correct time displayed in the upper right-hand corner of the screen. If not, repeat step 2 to make sure your settings were saved properly.
For more in-depth details read our article about forex market hours.
At this point, you should have the Forex Factory calendar in front of you with each news event synchronized with your local time. Next, we are going to set the event filter to determine the type of news and currencies to display.
This is convenient if you only want to display certain types of news events or are only interested in specific forex markets. To set the filter, click the “Filter” icon in the upper right-hand corner while on the calendar tab.
After clicking “Filter”, you will get a screen like the one below. This screen gives you the ability to filter events by expected impact, event type as well as currency.
Pro Tip: Hover your mouse over the colored boxes under “Expected Impact” to get an explanation of each one. In short, red equals high-impact, orange is medium-impact and yellow represents low-impact news.
We personally like to focus on the medium and high-impact forexfactory news events. This gives me a complete picture of what to expect over the coming days without cluttering the economic calendar with news that will have little impact on the markets.
Once you have everything set the way you want, click “Apply Filter” to begin showing only the events and currencies you selected. You can change this any time by repeating this step.
You should now have your time zone set and your filter configured the way you want. Now it’s time to select the desired time frame. This is the span of time that will be shown on the calendar. The navigation pane you see below will allow you to set any time frame you desire.
From this window, you can choose a single day, a week or even the entire month. Also, note that you can quickly select predetermined time frames in the bottom half of the navigation pane. Pro Tip: Choosing to see the entire week is often the best approach when trading the higher time frames. This allows you to prepare for the next few days rather than just the next 24 hours.
In addition to seeing the “surface content” such as the event name, expected impact and scheduled time, you can also expand each event to see additional information. Be sure to use this feature with caution. It can be far too easy to get caught up in the nuances of each event. As price action traders we need to be more concerned about what’s happening on the chart and less concerned about the fundamental significance of the news. The image below illustrates how you can expand the details of a given forexfactory news event.
Once the icon above is clicked, forexfactory will immediately show additional details of the event.
From the screen above, you can see additional details such as the source, frequency, and history of the event to name a few. To close this window, simply click the “X” shown in the image above.
Before we move on, we want to reiterate how important it is to use these additional details sparingly, if at all. The real advantage of using forexfactory calendar as a technical trader lies in the scheduled time and expected impact of the news. Anything more than that and using a news calendar can become more of a distraction than an asset.
That concludes the process of setting up the Forex Factory news calendar.
Now let’s get into the second part of this tutorial and discuss how to use what you’ve just learned to your advantage when reading the forexfactory news. Continue reading or play around in a risk-free forex demo account and notice in real-time how Forex Factory news are moving the markets.
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Knowing how to set up the Forex Factory calendar is one thing, knowing how to use it properly is quite another. The first thing to understand is that you only want to focus on market-moving events. This means setting the filter to include only the medium and high-impact news events. By doing this, you don’t have to sift through the low-impact news to find the events that are likely to cause increased volatility.
Pro Tip: Below is a list of some of the major news events categories you should keep an eye on Forex Factory as you trade Forex.
Central banks issue monthly rate statements along with their views about economic conditions, available on forexfactory.com as well as inside MetaTrader 5 trading platform in the news section. Though many data points influence market expectations about rate changes, none are as important as the monthly central banks’ comments on its outlook for the economy
What Drives Interest Rates? Why do central banks change short-term interest rates? Generally speaking, they lower them to stimulate growth, and they raise them to keep inflation low. Their benchmark overnight lending rate is typically an attempt to strike a balance between these two needs. Economic conditions determine which need takes priority. In bad times, promoting growth is usually the main concern, hence lower rates. In good times, cooling inflation is the priority, hence higher rates. It’s common to see nations with stronger economies have stronger currencies because their central banks will be raising rates, both to minimize inflation threats and to buy themselves more room to lower rates (which encourages growth) when their economies weaken. From a trading perspective, forex movements are more influenced by changes in market expectations about the direction or pace of rate change than actual rate changes themselves (which are usually anticipated and already priced in when they actually do occur). For example, imagine central banks A and B announce equal interest rate increases on Forex Factory. Currency A shoots higher, and currency B sells off. Why? The two most common reasons would be:
This situation is analogous to earnings announcements for the stock market. Whether or not a given stock rises after its quarterly earnings announcement depends on both whether the announcement beats expectations and whether it raises or lowers expectations for the future. Even if a company reports stellar results, if it doesn’t beat analysts’ expectations, or if the company issues lower guidance for coming quarters, the stock is likely to sell off, because markets reflect expectations about the future. News that affects interest rate expectations affects currencies just like news that affects earnings expectations influences stocks. If expectations remain unchanged, the currency is likely to remain stable versus other currencies. If expectations are lowered, the currency is likely to fall.
Similarly, any change in conditions that suggests a central bank is more or less likely to change its rate policy can also influence interest rate expectations and thus forex prices.
Indeed, it’s no exaggeration to say that the importance of a given, new item is typically a function of how strongly it’s believed to influence central bank interest rate decisions. In sum, expectations of rising rates are a reliable and potent fuel for higher currency prices, and expectations of falling rates are the opposite.
These influence currency prices because they’re barometers of the following:
In short, the underlying fundamentals of currency don’t have to be objectively good, just better than enough of the others and voila`, you have an up-trending currency.
Which fundamental data are most important? Here are some guidelines:
Rather than focusing on each of the key fundamentals, we’ll provide a brief listing of the macroeconomic indicators and data to watch on the Factory Factory calendar as major headlines (HIGH IMPACT). Details of these may vary from country to country. You’ll find abundant free resources about them online. You need not memorize them. Rather, check any good online economic calendar like those of ForexFactory.com. These rank events by importance and include explanations of the significance of the data. ForexFactory.com’s calendar is better on general significance.
Again, you could follow more indicators and reports on forexfactory but these are enough to get you started. As you develop your trading style and preferred news and analysis sources, you’ll develop your own list.
Though all financial markets can be influenced by major geopolitical events like news of political instability in key countries or military actions, few are as sensitive as the forex market because of its extremely international nature. Of course, certain currencies and their related pairs will be especially sensitive to related local developments. As stock prices reflect market sentiment about companies, so do currencies for countries. Thus, they are responsive to geopolitical changes insofar as these affect expectations for interest rates, growth, trade and capital flows, and so on for the underlying economies.
Because the professional traders who manage the big money in forex focus first on risk management (take the hint, so should you), the first rule of trading based on geopolitical unrest is that markets tend to sell first and ask questions later. In other words, markets are prone to volatility in times of serious unrest. Remember, whenever professionals fear any threat to their capital, they quickly retreat into cash, especially safe-haven currencies, until the political risk fades.
In sum, a general rule of thumb in all kinds of financial markets including forex is that politics usually trumps economics. In other words, very good or bad geopolitical data tend to outweigh economic data.
Before moving on to news trading strategies, let’s recap what you have learned thus far.
By now you should have the time zone, filter and time frame set for your forex factory calendar.
You should know how to view additional details of a news event as well as which events are most likely to cause an increase in volatility. Next, we will get into how to strategically position your trades around major news events so as to minimize your risk.
The reason we want to use the Forex Factory calendar is to know when market-moving news is expected and thereby prepare for periods of high volatility.
As such, we want to run through a profitable forex trading strategy around the news.
Now let’s get into the third part of this tutorial and discuss how to use what you’ve just learned to your advantage when trading Forex Factory news.
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Now it’s time to bring it all together. By now you should know how to configure your Forex Factory calendar as well as how to manage news events. Let’s finish up this tutorial by discussing how price action plays a role in all of this.
Let's move about actually trading the forexfactory news through the price action strategies that form on your chart after the news is released.
What is a pin bar, really? How about an inside bar? You probably know what they look like, but have you ever thought about why they form?
These two strategies have a common thread – they are both the byproduct of news. Whether it be something that was just announced or a more gradual flow of news that causes market sentiment to either fluctuate or remain constant.
In fact, all Forex trading strategies are a byproduct of news in one way or another. However, the pin bar and inside bar price action really embody the essence of how news can influence a market. Here’s why…
Pro Tip: Stick to the higher time frames (4 hours and daily) in order to get a better feel for the impact of a major news event. This will help to eliminate the “whipsaw” effect that is common on the lower time frames.
Some of the best pin bars form on the back of a major news event. In fact, one of our favorite setups is the NFP pin bar. This is because NFPs are released at 8:30 am EST and the 4-hour candle on New York close chart closes at 9 am EST, giving the market thirty minutes to react. The timing of a news event like this can often cause the price for US Dollar pairs to rise or fall quickly, thus forming a 4-hour pin bar. Of course, it isn’t always the case, but when an NFP pin bar forms at a key level, it’s often worth taking.
The inside bar can be thought of as the opposite to the pin bar. While the pin bar represents a volatile push in either direction, the inside bar represents consolidation after a large move.
So whereas the pin bar forms as news is released, the inside bar often forms the day after a news release. This is why the inside bar setup is often referred to as a type of breakout strategy.
Pro Tip: While the pin bar can be traded on the daily or 4-hour time frame, the inside bar is best traded only on the daily time frame.
Before we end this section, we would like to point out that the news which causes these types of moves isn’t always immediately apparent. The markets can move because of an unscheduled event or perhaps an event that has already passed and the market is just now realizing the impact. Regardless of how or when the news occurs, the two strategies above give you a quick and easy way to read the news via your charts.
We have covered a lot of material in this tutorial. Everything from how to configure the Forex Factory calendar to how to use it when trading price action. As such I would like to summarize some of the more important points to keep in mind when using the news calendar.
First and foremost, the news calendar should never be used as a tool to help you enter the market. In other words, attempting to trade a news event for the volatility it causes is a surefire way to blow up a trading account.
The calendar can, however, be a great way to keep track of upcoming events. Knowing when these events are scheduled can help you make decisions about the timing of your entries. It’s also helpful if you have an open position as it gives you the opportunity to book profits before a potential increase in volatility.
As a price action trader, you have a distinct advantage over other market participants using something other than price action. You have the ability to read the news through your charts using strategies such as the pin bar and inside bar. Just remember to stick to the daily and 4 hour time frames with the exception of the inside bar, which should only be traded on the daily time frame.
Now It's Your Turn...
Are you ready to start using the Forex Factory news calendar?