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We break down all possible outcomes and come up with trade ideas based on analysis of past events impact.
A good analogy can be made to the weather forecast. Let's assume for a moment you are in a room with no windows and you see on TV that the weather forecast is Bright and Sunny. You step outside from your windowless room and Voila! There is a raging thunderstorm. You will obviously need to go back inside and make new plans. Maybe you will get a coat, umbrella and boots.
All markets operate in a similar fashion. New data (surprises) are constantly driving the markets.
A major part of an analysts job is to "weather forecast" what value the number in the Economic Events release will have. In other words the analyst needs to figure out before the event, what the new data for the economic event will be.
Analyst predictions are abbreviated EXP (shorthand for expected). Every economic event has a time and date scheduled for the Actual data release. The Actual data is what traders and investors are waiting to see.
At the moment of an Economic Events release the market gets new data (the Actual value). This data can be relevant to and cause effect on various markets (like the S&P500 EURUSD etc).
Let's say GDP of the U.S. will be released at 8:30 EST. Prior to this moment the field representing Expectation is available but the field representing Actual is not yet available. The actual value will be released at 8:30 EST by the government agency responsible for this measurement. Analysts will determine a EXP value for this event maybe even days or weeks before 8:30.
These images represent the data from the example we discussed above in the BetterTrader app before and after the event release. For a more detailed explanation - Click Here
As soon as the Actual data is released the market immediately starts taking it into account. traders will be very surprised when there is a large statistical difference between Exp and Actual. When market participants are very surprised by any new data they will react very strongly. This will heavily impact any markets correlated to the event.
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