The Useless Forex Calendar... yes or no?

Since the GFC of late 2007 the Forex Calendar posted on this site has been perversely W-R-O-N-G in its indications of "GREEN-is-GOOD" and "RED is BAD" for an economy releasing the data.

There are several things wrong with this today:

1) Since the GFC we have seen the "safe-haven" behaviour by market participants - if the USA unemployment numbers are terrible, the USD gets bought "because when everything is going to hell, the USD will be the safest place to park your money."

Right ... for now ... because the heat is on the Euro, and the incredibly FAR WORSE condition of the bankruptcy of the USA is not being focused on by the markets.

So what the Calendar is telling us is ... "yes, it might be bad for an economy ... but it is good for the USD."

Then why doesn't the figure appear in G-R-E-E-N instead of red??? Traders are trading currencies ... not economies - and it has been this way for 5 years.

2. The figures themselves as reported, are nothing more than the fox in charge of the hen-house, telling us that there are still 15 hens in the coop, when there are only 12, and those feathers and that blood you can see, is a result of the fox chasing off a marauding coyote! (No animals were harmed in the compilation of this analogy.)

Let's take a look at some of the numbers themselves. Without getting too involved, let's consider the accuracy of the figures we are fed:

a) Biggest decline in factory jobs in 2 years - 15,000 jobs.
b) Number of industries hiring new staff lowest in 3 years
c) The length of a work-week shrank - fewer hours worked
d) Unemployment rate (U3) reported to have DROPPED to 8.1% ... but ...
e) ... the number of people working also dropped ... go figure!
f) 368,000 Americans left the workforce last month - most giving up on finding work ... and ...
g) ... the participation fell from 63.5% to 63.7%
h) There are fewer working-age people in the workforce than at any time since 1981
i) The BLS Unemployment number (U6) is 14.7%
j) Shadow Stats dot com say the unemployment figure is around 22.8%
k) Almost 100million people do not have a job and have stopped looking, or given up on ever getting a job

I could go on and on ... but the point is, when the numbers are bad, the USD gets bought ... and vice versa. The market knows this but still plays along with the charade!

Then we could look at the inflation figures ... CPI mutates every time the numbers appear too uncomfortable. For example, the true CPI would be about twice the current levels, if the truth was told.

Consider how it is done: The cost of meat is counted as a part of a family's expenditure and family budgetary costs. But the price of beef goes up, so they stop counting beef, "because people are not spending money on beef anymore, we don't count it. We cound ground beef and sausages."

Or they count chicken instead of ground beef. And so it goes - the figures have been fudged this way since Clinton and probably beyond, as far as I have been able to discover.

So with the scene set, and most of us understanding that the numbers are fake, why does the Calendar report numbers that are designed to make the USD rally, as RED, and the good, improving numbers, which will cause the currency to get sold off, as GREEN?

Doesn't anyone think this is a bit silly - why stick with a system that is plainly diametrically opposite to what it used to be?

Why publish figures in GREEN or RED ink, knowing full well that the currency to which the numbers pertain, will do the opposite of what the news implies?

I think the Calendar has diminishing value - I admit to looking at it, but only to get a quick idea of the timing of news announcements, so I can remove a trade that might be vulnerable to market fluctuations at that time.

Thoughts?

I agree, for most of us, it's only an indicator of volatile periods. Those in the know, with a feed faster than greased lightning, may be news trading, or machines fading the initial overshoot, but that's not this calendar anyway.
You got a very good point there, what good are better than expected payrolls when there are less people in the labour markets. See things in the proper context, that is.

First my Disclaimer: I rarely ever trade the News or economic stats, but when I do, I trade the reactions and not the bias. I don't take into account the market's pre-release biases nor do I have any biases or opinion about where price SHOULD be post-release. Like you Ingot54, I only ever look at the calendar for scheduling but I also look at the impact colors (red, orange, or yellow). I don't care much for the forecasts.

My two cents:

 

1. Just as it's ridiculous to assume that price SHOULD move congruent to economic data, surely price doesn't ALWAYS move opposite to what data implies.
2. When price DOES move opposite to what the data implies, it could be that there are other factors in play e.g. barrier option protection/attacks, other geopolitical issues taking precedent, "buy on rumor, sell on fact" etc etc.
3. The fact that a particular stat is green or red and that price moves opposite to what is implied by those colors is GREAT usable information, and as such does not diminish the value of the FF Calendar one bit.
4. On its own, the green/red stats along with the forecasts must be of some use to traders out there who prefer trade longer-term outlooks and on fundamental analysis and who can ignore short-term counter-trend spikes. I know some who are successful at this, so I personally won't discount it.

A suggestion: Try using the Calendar in conjunction with FF's Market page. Take a look at FF's Market page and play around with the Chart while taking into account the impact icons (Calendar events only).

You can do your own research as to which data is less or more becoming the new flavor of the season and perhaps even fade the price in the future based on your new-found information.

Hope that helps.

Your interpreting economic data incorrectly... Ill show you what goes through my head as I analyze economic data as I trade. This is the best way to show you how I successfully use it...

2:00am EUR German WPI m/m - SEP 11th
As I was watching price move through a downward cycle I watched the news release... Price moves back up toward the top of the 5m candle on the moment of the news release.
I thought...
"Good reaction! Nice... Now lets see if we can get a buy setup..."

I watch and about ten minutes later my technicals start signalling a buy after fifteen minutes of solid selling after the good news... I monitor the first few uptrend candles intently...
"Very very nice move... Gonna hold this one for a bit." Price proceeded upward like a rocket at that point...


My interpretation of the news really just depends upon the technicals... Get good news in a downtrend... Usually starts to turn the technical trend back up sooner than otherwise and vice versa.

As for interpreting the news... The reaction in the first few seconds of the news tells you if it was good or bad.

Sometimes the news is useful and sometimes it's not. If the markets are trending for hours towards a big news release generally they stop the move around a hour before the news release.

How to trade the news just depends upon the technicals... Sometimes the setup is to long after good news, sometimes it's to go short after good news... Sometimes it's to go long a while after the good news as a selloff slows down and a buy signal fires... It all depends upon the technicals! LoL...

One thing I like to say is... You can't be sure about the news until both the rally and sell move after the news as traders try to break the market in a direction... Which direction traders manage to break it confirms the effect of the news.



Think about it this way... If were in a downward move within a downtrend and good news hits... People are not just going to step in and buy. Most are going to wait until price starts to move up. When price starts to move up people start to rationalize the price move based upon the recent news which makes it stronger that it would otherwise be.

Here are a couple extra tricks when it comes to news...

If price rallies for hours before a big news release that is good news... The good news when it comes out is most likely pretty much priced in. Rallying strongly for hours before news = rumor move. Buy the rumor, sell the news.

Same for vice versa... Unexpected good news that comes out in a flat market or downtrend has higher odds to actually kick off a uptrend. Unexpected bad news that comes out in a uptrend or flat market has higher odds of kicking off a downtrend.

If the trend is really strong it can generally absorb the liquidity that hits the market and just reduces trend back to sideways as long as the news wasn't too big of a deal.

Thanks for the replies, people. It's good to see that people are still willing to engage the topic on a deeper level - FF is a good forum.

My original lament was a bit more to do with the colour of the news release on the Calendar, rather than how to trade the news.

A trader looks at the High Impact (RED) news release, and sees the number in RED, and would think (if he didn't know better) that the currency would be a "sell."

Take the AUDUSD on Monday September 3rd - see chart below.

There are no other more recent high impact, specific news-releases that stand alone, so I had to go back to this one.

Clearly the fall in retail sales is NOT good news for an economy. And the medium impact news was also not good - Company operating profits also dropped lower than "market expectations."

Any person seeing these numbers and seeing the RED print, could be forgiven for thinking that the AUDUSD would get sold off a little.

No - the AUD rallied for a few hours, before resuming the downtrend. Then on 5th September, GDP came in lower than expected (RED) and employment number dropped (RED). That day, the AUD turned and the current rally - from a low of 1.066 began. Even the RED balance of trade number didn't faze the AUD - it just swept on regardless.

As I write ... a week later ... the AUD is tripping new recent highs @ 1.04 - 1.05.

I don't trade the news - most of us who trade longer term know that the trend is usually not influenced by news. The trend may flutter for an hour, but then resumes its previous course - usually at a slightly higher/lower level, that's all.

The current system benefits brokers, not traders. At least new traders, and can be quite misleading.

Has the Calendar outlived its usefulness in this high/low impact area?

What is the significance of reporting a number as RED or GREEN when it is clear to anyone looking on, that the currency reaction is frequently doing quite the opposite of the colour?

Note: This has only developed since the GFC, and I believe it is a result of risk-on/off behaviour. But traders are still playing the game, and falling over themselves to see what the news release says.

Ingot54, I see your point.

But perhaps if you'd only confine the Red/Green interpretation as being bad/good for the ECONOMY being observed rather than on the currency itself, you might feel less disappointed.

I see in the notes for the Aussie retail sales number, it says,
"Actual > Forecast = Good for currency;" instead of being "good for the economy"

(Hopefully the powers-that-be at FF will consider adjusting the above language for many of the econ stats they cover.. )

As for the Calendar's seemingly declining usefulness, I would still contend that it may yet still be useful in that we now have a gauge of which economic statistic is the short-term flavor of the season, taking into account prevalent geo-political issues of the day. i.e. we now know of opportunities to "fade" the currency pair.

And let's not discount the possibility of extremely late (and "correct") reactions to domestic economics once international economic issues fall back in the background.

I think it's been statistically proven that short term reactions to news are totally unpredictive when it comes to price trend... The trend after news kinda just depends upon if people bought/sold rumors leading up to the news or not.

News alone for trading is no better than flipping a coin...

Green vs Red? Are you suggesting Forex Factory supply a buy/sell "signal" by color coding the high impact releases green/red? With nobody else in the universe capable of knowing which way price will move, what makes you think Forex Factory does?

As another has already mentioned, FFCal events can be times of increased volatility. In a trade coming up to an event? Maybe it should be closed? Thinking of entering a trade prior to an event? Maybe not a good idea because things could radically change, or at least blow out your SL? Considerations such as these are prompted by knowing when stuff is going to happen. And such is the value of FFCal. It has good "Heads up!" value.

So far as what will the market do once the data is released, it will do what it has most likely already planned to do no matter what is released. And that is why sometimes price moves totally contrary to logic. Or, as in some cases, price moves 100 or more pips back and forth two, sometimes three times during the remainder of the day! Releases sometimes are used by the market as nothing more than an excuse to whip prices around. And the released content could just as well be a weather report for all the effect it has on what the market has decided to do. Such price whipping at releases can really be for the purpose of enabling the "market" to change positions (long to short or visa versa) because the "market" has a longer range plan, and is just using the event of a major release as the excuse to whip prices around so that it can reverse positions for some entirely different reason.

FFCal is useful if used as a Heads Up, nothing more. Anyone trying to "trade the news" has much bigger problems than any shortcomings of FFCal.

Price action upon outcomes of news releases are unpredictable. If price were predictable (good go up/bad go down), there would be no one to take the other side of the trade.
Market liquidity providers know this and don't want to get screwed over during unpredictable moments so they'll start pulling out of the market as news event approaches. This causes your broker's posted spreads to widen since they pass those prices on to us, the retail traders.
Right after the economic data is released, the market does not have a cushion to absorb the frenzy of incoming orders that stem from that outcome (market buy/sells, stops tripped, positions adjusted, ect). At these times price will jump around until it finds liquidity in pending orders to which price will temporarily stabilize.
Understanding what and where these orders are (and WHY they're there) is important since we rely on them to move price. Which is how we profit.

Here's some tidbits from ForexLive about Aud/Usd's orders on Sept 3/4th post-news.
http://www.forexlive.com/blog/2012/0...-summers-over/
http://www.forexlive.com/blog/2012/0...-disappointed/

Hi friends

I'm assuming your stop was above the high of ~1.0505, like many highly accurate retail traders that can forsee a 300pip drop by using historic prices. A/U price action on Sept 13th around 1700GMT shows what an abundance of stops look like when they turn in to market buy orders and are unleashed upon the market.

You've missed the point totally - no, I did not, and am not suggesting that. I stated I don't trade the news, but use the Calendar to spot up-coming events so as to remove vulnerable trades. I doubt anyone would trade the news based on the colour of the response to the release.

Why do you think I said that, or was thinking that? That is NOT my point, and I am not suggesting it. This is not a shallow lament.

Yes, exactly what I said in an earlier post.

Very good points, Tradeathome. This is closer to the issue.

Yes, exactly.

Let me restate my issues with the Calendar: Whatever colour the number is printed at the time of the news release, has NO bearing (at least not since 2007) on what the market does with the news. Therefore, why give it a colour at all, since the trend usually resumes the same direction is was already heading prior to the release.

The real issue is the "safe haven" issue, and the disappearance of logic.

I think it is time for an overhaul of the simplistic RED / GREEN system, and I think this represents an opportunity for FF to broaden how they present the news calendar.

If I was operating this forum, I might be considering HOW I could use the anomaly to provide some kind of expanded commentary ... for example an "either / or" strategy based on the likelihood of a trend reversal / trend continuation following the release.

This is not coin-flip stuff, but an expert of many years experience could provide a mature scenario "in a nutshell. The commentary would need to take into account the twisted logic of risk-on / risk-off thinking, carry trading, economics, Bernanke factors and so on.

The ultimate goal of the bizarre economic activity we have been seeing since Greenspan created the crisis with his cheap credit over the preceding years, is still unclear, but in order to understand it, one must cast logic aside, and temporarily adopt a smidgen of conspiracy theory, as put by Tradeathome:

Tradeathome - I apologise to you mate, for coming across a bit harshly - it is not personal - I respect your excellent work on the forum.

But I highlighted a couple of things you said, to try to more-clearly make my own points. I do appreciate what you responded with, and normally, your observations would be spot on regarding the news release situation.

But we need to rid ourselves of the RED / GREEN mentality nowadays, because it is simply pointless, and has NOTHING to do with the currency.

And it will not have anything to do with a currency until safe haven / risk on/off have disappeared.

Thanks for your input to this concept.