What is Economic Calendar?
An economic calendar is a sorted list in chronological order of the events that tend to move the markets. These events are usually releases of macroeconomic indicators, monetary policy decisions, speeches, and other events that have a high probability of influencing the financial markets. It is an important trading tool especially if you are a news trader because this type of trader makes his trading decisions based on economic calendar news releases.
It is usually displayed in a table showing date and time of release, the name of the indicator or of the event, the impact on the market, actual reading (when it was released), the expectation, and previous reading. Price action tends to move before and after the news was released and even in some cases, the release can change the trend. These movements are greater if the deviation between the actual reading and expectation is greater. They are seen as a trading opportunity for news traders to enter.
How to use it?
It is important to know that each currency represents the economic, political, and social stability of a country. So, the changes in the indicators are very likely to affect the value of the respective currency. For example, if you are trading EURUSD pair you should look for the news releases form both the Eurozone and US economies. Higher impact news will create a higher movement than lower impact one. The deviation is another factor that can cause a move. Better than expect Eurozone release will be bullish for EURUSD pair while worse than expected will be bearish for the pair. On the other hand, better than expected US release will be bearish for the pair while worse than expected will be bullish.
The most important events in the economic calendar are jobs data (Non-Farm Payrolls, Unemployment rate, Employment change, Job Openings), purchasing managers index (Manufacturing PMI, Service PMI), inflation indicators (Consumer Purchase Index, Producer Purchase Index, Retail Sales), trade data (Export and Imports), GDP data and monetary policy decisions (Interest rate decisions and central banker speeches and press conferences). Many political events like OPEC or G7 can also influence the markets.
Economic Calendar Indicator for MT4
MetaTrader 4, the most popular trading platform, does not offer economic calendar functionality. The majority of MT4 news traders tend to trade manually by consulting the calendar form their preferred investing related web portal. However, with the introduction of custom MT4 news indicators, automated news trading has become possible in the MT4 platform.
The most popular indicator is the FFcal indicator that imports data from forexfactory.com, a leading forex forum. Also, there are many other indicators available but the vast majority uses this indicator engine. It allows you to integrate its data to your expert advisor. The indicator is free to use and it can be found on the forum. Another very popular and recommendable economic calendar indicator is also available for free and it is the FX Blue News indicator.
FFcal installation process is simple and straightforward, you just need to start an EXE file and specify your MT4 instance.
After the installation goes to Tools → Options → Expert Advisors and checks to Allow DLL import option and Allow web requests for listed URLs.
Add www.forexfactory.com in the listed URL and apply the changes.
Now you can drag the indicator into a chart. If you have done everything correctly on the chart you will see the information about the news releases.
In the input settings, you get numerous options for display settings. You may choose to display all news or just for the chart pair currencies and you may select the news to be displayed only by currency. You may choose the importance levels you want to see. It is very important to enter the GMT offset parameter, so the indicator can work correctly. Other parameters will change the appearance settings (corner, font, etc.).
So, an Economic indicator is a very important trading tool not only for just for news traders but also it should be consulted for all trading styles. MetaTrader 4 does not have this functionality built-in but it can be imported in the form of the custom indicator. FFcal indicator is the most widespread and highly recommendable solution. It imports the data from forexfactory.com. It allows you to build the expert advisors that make a trading decision based on the news releases.