Forex Factory Guide: Economic Calendar, News & Tools

Have you heard of Forex Factory?!

If not, that’s a real shame, because it’s been the leading forum for forex and traditional-market traders for 20 years now…

The reality is that most retail traders don’t take full advantage of everything Forex Factory has to offer!

Most of them, unfortunately, only think about one thing: jumping into the “Trading Systems” thread to hunt for a new trading strategy to exploit, a fresh trading pattern and some setups!

They run these strategies for a while, fail, then head back to the forum to look for THE right one… And the cycle repeats!

In fact, most of the strategies posted there are already played out and don’t produce anywhere near the same results they did when they were designed and actually traded.

Forex Factory is more than just a place to find new trading strategies. It actually offers genuinely useful trading tools that will improve your trading experience, without costing you a single cent.

Curious to know how? Then follow the guide!

Ready?! Then let’s get started…

Forex Factory: The Economic Calendar

Staying on top of the news keeps you safe from nasty surprises and lets you anticipate volatility! Sadly, there’s no guessing the content of an upcoming release. That said, if you get good at anticipating it, the jackpot is all but guaranteed!

The Forex Factory calendar highlights the key upcoming fundamental data.

You’re probably wondering:

“If I’m a Price Action trader, does this even matter to me?”

The answer is yes, especially for short-term traders who practise scalping and day trading.

Let’s take 2 basic examples:

1. You don’t want to enter your trades right before a major news release, because volatility could widen and put you in a very unfavourable position.
2. Likewise, if you have an open position, it’s better to reduce your risk exposure so you don’t get stopped out by a potentially very bad piece of news.

Makes sense, right?! Yes, it does.

Now, if you want to know how to read Forex Factory news, let’s learn to use the Forex Factory calendar to our advantage!

1. Select your time zone

Simply click the “Time” button in the top-right corner of the page.

• Then select the time zone you’re in. And you’re all set!

2. Filter your news on Forex Factory

A lot of news comes out every day from different countries. Things like CPI, PPI, retail sales, inflation, the central bank, unemployment, and so on.

Most of it doesn’t move the markets, because these aren’t major events.

One of the keys to reading Forex Factory news is knowing which news to ignore and which deserves your full attention!

That’s where the Forex Factory news filter comes in handy:

• Click the “Calendar” tab at the top of the page
• Then click the “Filter” button in the top-right corner of the page.

You should see something like this:

Next, “check only the red-coloured box.” Everything else is literally considered useless by BBS, our traditional-markets specialist!

This means the calendar will only reflect high-impact news events. If you’d like to include low-impact events, feel free to do so and check them out for yourself, that matters too. The reality is that if you pay attention to everything, you’re actually paying attention to nothing, so be “picky”!

Next, tick every event type, because you don’t know which ones are the high-impact events. So it’s safer to tick them all.

Finally, you can select the country information you want. I’d advise ticking them all so you stay aware of the important events happening all around the world.

By the way, never miss a last-minute news release that could “break” your market

With a single tweet, Elon Musk can flip your profits into the red…

To reduce your risk exposure, you at least need to be aware of this news the moment it hits.

Here’s how to do it:

1. Click the “News” tab at the top of the page
2. Then select “News / Hottest Stories” on the right-hand side of the page.

You’ll see this:

Then tick “Breaking New” and “Latest”.

That way, only the important news will show up on the right-hand side of the page.

That’s how to read Forex Factory news and use it to your advantage without wasting time or missing the essence of the news!

Policy Rates: An Example of the News vs. Markets Correlation

Policy Rate: Definition

Policy rates are the interest rates set by central banks (the Fed in the US and the ECB in the EU being the best known) for short-term loans to commercial banks. The main policy rates include:

1. The refinancing rate (or refi rate): the rate at which commercial banks can borrow money from the central bank.
2. The deposit rate: the rate commercial banks receive on the deposits they place with the central bank.
3. The discount rate: the rate at which the central bank lends directly to commercial banks.

How do policy rates influence the financial markets?

Impact on short-term interest rates

Policy rates directly influence short-term interest rates. When policy rates rise, borrowing costs for banks go up, which often leads to higher interest rates on loans to businesses and individuals.

Impact on the cost of credit and on investment

Higher interest rates make credit more expensive, which can reduce borrowing and spending by businesses and consumers. This can slow economic growth. Conversely, lower interest rates stimulate borrowing and spending, thereby supporting economic growth.

Impact on bonds

Policy rates affect bond yields. When interest rates rise, the prices of existing bonds (which offer lower rates) tend to fall so as to provide yields comparable to newly issued bonds at higher rates. This can lead to losses for bondholders.

Impact on stocks

Changes in policy rates influence stocks in several ways:

• Cost of financing: higher rates increase the cost of financing for companies, which can reduce their profits and, as a result, their share price.
• Appeal of alternative investments: higher interest rates make bonds and other fixed-income instruments more attractive relative to stocks, which can lead to a drop in demand for shares.
• Investor sentiment: central banks’ decisions on policy rates can influence investor sentiment. For example, a rate hike can be seen as a sign that the central bank is worried about inflation, which can rattle the markets.

Impact on currencies

Interest rates also influence exchange rates. Higher interest rates can attract foreign capital, increasing demand for the local currency and therefore its value. Conversely, lower rates can lead to a depreciation of the currency.

Policy rates are central banks’ main lever for managing the money supply and thereby exerting considerable influence over the economy. Their impact on the financial markets is raw, complex and fickle, directly affecting interest rates, financing costs, bond yields, stock prices and exchange rates. Investors and businesses keep a close eye on central banks’ decisions regarding policy rates, because these decisions can carry significant implications for the economic outlook and the performance of the financial markets.

Sentiment Indicator: Analysis & Interpretation

How to use Forex Factory’s sentiment indicator – or Fear and Greed – and find high-probability trading setups

It’s a sentiment indicator based on the traders present on the Forex Factory Trade Explorer. It turns into a visual chart that shows you the share of long traders and the share of short traders on a given pair.

Here’s how to access it:

Click the “Trades” tab at the top of the page. Then scroll down the page and you’ll see this:

I think you’ll agree that, as a general rule, most retail traders enter the market at the worst possible moment. I’m thinking of behaviours like “chasing” the market after it’s made a big move, or trying to pick the market’s tops and bottoms!

Knowing this, you can use the sentiment indicator as a contrarian approach

You’ll look to go long when most traders are short, and long when most traders are short.

Here’s how to do it:

1. Identify a currency pair that reaches an extreme value of at least 60%.

2. Wait for a valid trading setup that goes against the herd.

Here, for instance, we have 3 or 4 examples with EUR/USD, GBP/USD, AUD/USD and NZD/USD

3. Let’s take Euro against Dollar, for example, because we know this pair well!

You want to go against the herd. So you’ll be looking for a long trading setup.

Moving on… the 4-hour timeframe of EUR/USD looks like this:

So, how do you take a position?

Well, you can look to enter in the support zone if there’s a price rejection, such as with an Engulfing pattern if you’re a chartist or a price action trader.

If you want a full explanation of entries, Take Profit and Stop Loss, I invite you to go back through my courses and guides available on our site!

One last little thing…

You shouldn’t enter a trade just because the sentiment indicator is at an extreme. It can stay at an irrational level longer than your account can stay solvent!

That’s why you need a valid trading setup with precise entries and exits, in order to confirm the signals given by an indicator you’re not used to using.

That said, by the time we finished the article, we can see it would have played out nicely on scalping/intraday… Indeed, it later dropped back down, which is what allowed BBS to validate one of his finest trades in terms of R. The figure was 19R on that same pair, if I’m not mistaken.

And yes… on the traditional financial markets, you can pull off very big R because the signals are generally much clearer than on the crypto market. SL hunting is far less common too, since liquidity is considerably higher than on the crypto market.

Don’t Get Lost in Time?!

By the way, here’s a tip that can be quite handy at the start, if you fancy trading across every continent…

Click the “Market” tab at the top of the page.

Live Forex charts right in front of your screen. No download, login or subscription required, and just below the charts you can see which market session is currently open (whether it’s Sydney, Tokyo, London or New York).

This tool is useful for traders wondering what time the London or New York session opens, and whether or not daylight saving time is in effect.

Thanks to this tool, you’ll never again have to puzzle over how the local market openings line up. What’s more, it’s synced with the time zone you set earlier (or the one set automatically when you signed up).

Now let’s move on and look at a few Forex Factory features that you’ll have no trouble finding elsewhere, but who knows, maybe you’ll like them here!

Trading Journal

How to create a trading journal in Forex Factory and improve your trading results?

Here’s what you need to know:

If you’re serious about trading, you need to keep a trading journal. It’s the only way to keep track of what you’re doing so you can improve it.

Without a journal, trading can easily be compared to a perfectly ordinary game of chance in which luck plays too large a role for us traders, forever chasing break-even!

That said, I bet that 80% to 90% of you reading this right now don’t have a trading journal, or don’t record your trades properly, which amounts to pretty much the same thing as doing nothing.

In this section, I’ll give you a few tips for using Forex Factory to keep your Forex Factory trading journal.

Why create a trading journal in Forex Factory?!

That’s a good question, here are 3 answers:

1. Accountability

The reason traders give up on their trading journal is that there’s no one keeping an eye on them…

So by keeping a trading journal in a public space, you make a commitment and you have someone to answer to.

Going back on a commitment you make on your own is always easier, isn’t it?!

2. You can learn and draw inspiration from the Community

Once you start keeping a journal of your trades, you’ll attract like-minded traders to your thread. From there, you’ll be able to exchange ideas and feedback to improve your trades together.

3. The journal is stored in the cloud

From then on, there’s no risk of losing your information. What’s more, it stays accessible anywhere with an internet connection… and for years! Even if you’ve decided to step away from trading for a while, you’ll still be able to find the record of what you did!

How to set up your trading journal in Forex Factory?

1. Click the “Forum” tab at the top of the page.
2. Then click the “Trading Journals” link in the middle of the page.
3. Then select “Start a new thread”.

Once you’ve completed this third step, you’ll see a window that lets you write up your journal and your plans.

Now you’re probably wondering:

“But Captain, what should I post in my thread?”

Here’s what I suggest:

1. Introduce yourself and declare a 6-month commitment. Any less might show that you don’t have any particular determination and that you’re just testing the waters.
2. Explain your trading methodology and write out your trading plans
3. Post the charts of the trades you’ve taken
4. Also post the charts of the trades you passed on.
5. Post your thoughts and reflections for the trading week

After a few dozen trades, find the patterns that let you win and lose!

Exploit your pattern to the fullest and repeat!

The key here is discipline, as it is in so many respects when it comes to trading.

Just as with knowing how to read Forex Factory news and learning strategies… There’s no point doing it for a few days and then stopping, because that defeats the whole purpose.

To see results, you have to commit to doing it for 6 months. If you follow what I’ve said, your trading results will improve dramatically!

If you want to learn more about the tools we use for trading forex and the traditional financial markets, there’s Metatrader, which is THE go-to platform for operating on the traditional markets. There’s also Fusion Markets, which we use as our broker, quite simply because it’s the cheapest one available to retail traders.

Since news trading is much harder on the crypto market, I wouldn’t recommend a crypto platform here. As you know, on that market I focus on Price Action above all.

Ready to climb into the Forex Factory leaderboard?!

Now I have one last question for you:

And you… How do you use Forex Factory?! If you’ve got any extra tips, don’t hesitate to let us know in the comments on this guide!