How to read the economic calendar

Many beginner traders make mistakes when interpreting the economic calendar. The first of these is ignoring the significance of 'impact'. For example, when you see an event with a high impact, such as the release of unemployment data in the USA, and yet you open a position without proper hedging. This often results in slippage of 1-2% on the day of the release, which with a capital of 10,000 PLN results in a loss of up to 200 PLN. The second mistake is a lack of understanding of 'consensus'. Let's start with a situation where the consensus is 4%, and the actual result is 3.5%. Misunderstanding this difference leads to erroneous trading decisions that could cost you another 150 PLN. The third mistake is unawareness of 'deviation'. For example, if you expect a certain result, but the deviation is large, it may mean that the market will react sharply, causing a loss of 1% of capital.

Interpretative errors in the economic calendar are problematic because they lead to incorrect investment decisions. The market reacts to all three elements: impact, consensus, and deviation. When you are not aware of how these elements affect asset prices, you expose yourself to unforeseen market fluctuations. The mechanism is as follows: data with a high impact cause sudden movements in the market, and if your stop loss is not set appropriately, you may experience significant losses before you can react. Slippage and unfilled stop orders can further amplify these losses.

Assuming you have a capital of 12,000 PLN. A misinterpretation of high-impact data can lead to a slippage of 2%, which effectively means a loss of 240 PLN. Additionally, if the market reacts to a deviation from the consensus and you did not foresee this in your plan, another 1% of your capital, which is 120 PLN, can disappear in a short time. Over the course of a month, such mistakes can occur multiple times, which can add up to several thousand PLN in losses over the year, which could have easily been avoided.

To avoid costly mistakes, take a few practical steps:

• Carefully analyze high-impact data before opening a position.
• Pay attention to consensus and deviations. If the data is close to the consensus, the market may be more stable.
• Set stop loss orders with a larger margin, especially on days when important data is released.
• Always check the economic calendar before starting your trading session to know what events may affect the assets you have chosen.
• Use price alerts and be ready to react quickly when the market starts to change.

Every morning, check the economic calendar before starting trading.