Economic event can be a significant driver of FX currency pairs. Using Economic Insight traders will have access to a modern and interactive toolkit that will help them identify and assess how an economic event impacts an FX pair.
First, lets define some popular FX trading terms that you’ll need to know when determining your Stop Loss and Take Profit Targets. If you feel comfortable with the terms below feel free to skip ahead to learn more about our analytics.
Within the Volatility Tab you can easily configure the Risk/Reward scenario you would like to use for your FX pair and see the corresponding Take Profit & Stop Loss you'd incur. As you scroll through the calendar, easily get to the screen by clicking "View Level & Trade". After tweaking to your own personal preference, your levels will then be copied over to your broker's' order page.
To set up your trade, you first need to view the Volatility Tab for an Economic Event. Fill out the following filters:
- FX Pair
- Observation Period
- Actual vs Forecast
In FX trading, a general Risk/Reward ratio used by trader is 1:2.
We will use an example with a 1:2 Risk-Reward Ratio (1.5:3)
Lets look at an example scenario:
Economic Event: Germany Inflation Rate
FX Pair: EUR/AUD
FX Pair Open Price: 1.6297
Observation Period: 4 hours after the event
Actual vs Forecast: Actual matched forecast
Historic True Range Pips: 45 pips
Average of True Range Pips: 45 pips
Bullish Events: 8/10
Bearish Events: 2/10
To follow our general Risk/Reward ratio of 1:2 (1.5:3) assume:
We use a factor of 1.5 for determining Stop Loss target.
We use a factor of 3 for determining Take Profit target.
Stop Loss Target: True Range 45 Pips x 1.5 = 67.5 pips
Take Profit Target: True Range 45 Pips x 3 = 135 pips
In this case, the EUR/AUD Trade Open Price is 1.6297.
Stop Loss target price would be 1.6297 - 67.5 pips = 1.6229
Take Profit target price would be 1.6297 + 135 pips = 1.6432
Stop Loss Target Price = 1.6229
Take Profit Target Price = 1.6432