The Forex Factory Calendar is by far the most user-friendly and accurate calendar to keep track of Forex-related news events. By the end of this tutorial, you will know how to use the calendar as well as how to read it in a way that is beneficial to your trading.
But before we get into the details, I 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 news events.
While it isn’t necessary to study the news, it is advantageous to know when 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 how you can use a Forex news calendar to start making more informed trading decisions.
Step 1: Getting Started With the Forex Factory Calendar
The very first thing you want to do is navigate to the Forex Factory calendar.
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 calendar so that you can get the most out of it.
Step 2: Configuring Your Time Zone
Now that you’re on the 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 hour “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.
Step 3: Setting the Event Filter
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 currency pairs.
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.
I personally like to focus on the medium and high-impact news events. This gives me a complete picture of what to expect over the coming days without cluttering the 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.
Step 4: Selecting the Desired Time Frame
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.
Step 5: Digging Deeper
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 news.
The image below illustrates how you can expand the details of a given news event.
Once the icon above is clicked, you will immediately see 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, I want to reiterate how important it is to use these additional details sparingly, if at all. The real advantage to using a 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 half of this tutorial and discuss how to use what you’ve just learned to your advantage when trading Forex price action.
Choosing the Important Headlines
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 the 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 you should keep an eye on as you trade the Forex market.
- Federal Open Market Committee (FOMC)
- Nonfarm Payrolls (NFP)
- Unemployment rates
- Final Gross Domestic Product (GDP)
- Monetary policy announcements
- Any rate decision announcement from central banks
Before moving on, let’s recap what you have learned thus far.
By now you should have the time zone, filter and time frame set for your 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.
Trading Around the News
The reason we want to use the Forex Factory calendar is to know when market-moving news is expected and thereby avoid or prepare for periods of high volatility.
As such, I want to run through a few basic rules when it comes to trading around the news. All of the scenarios below assume that the news event in question would hypothetically impact your trade. For example, trading USDJPY with Nonfarm Payrolls (NFPs) on tap.
No open positions ahead of a news event
This is obviously the safest place to be with major news around the corner. You have nothing at risk and you get to objectively analyze the price action that forms as a result of the news.
But what if the news isn’t just around the corner? How much time is needed between putting on a new position and a scheduled news event that could adversely affect that position?
This is a hard question to answer as it depends on a few factors.
- The trader – Trading style and risk tolerance come to mind. Every trader is different and therefore has different requirements when it comes to how risk averse they are.
- The time frame – On average, a trade on the 4 hour chart will require less time between the entry and the pending news than a trade on the daily time frame. This is because, hypothetically speaking, a trade on the 4 hour chart has a greater chance of running to profit before the news event occurs.
- Distance to take profit – Aside from the time frame, the distance from the entry to the take profit also plays a role. A trade with a 50 pip profit target will require less time than a trade with a 300 pip target, hypothetically speaking of course.
As a general rule, I like to see at least a 24 hour window in which there is no scheduled (major) news before putting on a trade. By “major” I’m referring to one of the events listed above. This of course can change depending on the last two factors listed above.
Open position – small profit
This scenario involves an open position that is in profit, but stands a good chance of turning negative if the news event in question adversely affects the position.
We’ve all been there – that point of indecision before a major news event is about to hit.
Should you close the trade and book a small profit to be safe? But then what if the market moves in favor of your position? If you close it now you risk missing out on potential profits.
In my experience, most traders fear a missed opportunity more than they fear losing capital.
This couldn’t be more wrong.
Your number one job as a trader is capital preservation. Making money always comes second. The path I choose 95% of the time in this situation is to take my small profit and get out. I can always get back in later if the market presents a favorable opportunity.
Just remember – when in doubt, get out.
Open position – large profit
The last scenario we’re going to discuss is the second safest place to be behind having no open position, of course.
When a high impact news event is around the corner and you have a position that is well into profit, you have more options. It’s much easier to ride out a major news event if you know your position is 200 pips in the money.
One thing that can influence your decision here is how far away your trade is from its profit target. Let’s assume this position was originally aiming for a 300 pip profit target and is now just 40 pips from the target. In this case I would be more likely to close the trade before the news event to book profits. To risk giving back 260 pips for an additional 40 pips isn’t the greatest of propositions.
Your other options are to take a partial profit and leave the remaining position on or keep the entire position open throughout the event. I’m not a huge fan of taking partial profits so I usually opt to go all or nothing. But one thing is certain, you have a lot more options with a position that has run into considerable profit.
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.
I have written before about how to use the news to gauge market sentiment. However this time I want to talk about actually reading the news through the price action strategies that form on your chart.
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 really embody the essence of how news can influence a market.
Pro Tip: Stick to the higher time frames (4 hour 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 my favorite setups is the NFP pin bar. This is because NFPs are released at 8:30 am EST and the 4 hour candle on my New York close chart closes at 9am 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, I 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.
Frequently Asked Questions
What is a Forex calendar?
The Forex news calendar is a vital tool for any serious trader. It shows the scheduled news events for the week and usually ranks them from low to high impact.
What is the best Forex news calendar?
I prefer the Forex Factory news calendar. It’s incredibly easy to use and is one of the more accurate calendars out there. Plus, you can enter your timezone so events are displayed in your local time.
Should you trade Forex news?
In my opinion, the answer is a resounding no! Trading the news is gambling. I’ve found it far more useful to study the price action that follows a news event than trying to guess.