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Managing Market Volatility With a Futures Economic Calendar

March 30, 2018 by Daniels Trading| Ag Marketing

The release of an economic data report can dramatically increase the degree of volatility facing a broad spectrum of asset classes. Metals, energies, currencies, and agricultural futures contracts are susceptible to wild swings in pricing following an official announcement.

In contrast to a surprise news event, a scheduled data release can provide a wealth of opportunity. Given the proper trading strategy, it’s possible to maximize upside potential while limiting risk during these periods of enhanced volatility.

Guide to Smarter Ag Marketing

Know Your Futures Economic Calendar

Depending upon the scope of the data and product being traded, calm markets can come alive in the blink of an eye. In order to successfully navigate the sometimes turbulent waters surrounding a data release, it’s important to be aware of several key aspects of each report:

  • Type: There are many kinds of official economic data releases. Some originate from government sources, while others are furnished courtesy of the private sector. No matter the source, understanding the relationship between the hard data and market being traded is crucial in anticipating sudden pricing fluctuations.
  • Expectations: The industry consensus pertaining to the contents of an upcoming report is a major influence upon price behavior. Often, it’s not the actual statistic that drives market sentiment but whether or not it’s a surprise to market participants. If analysts miss a projection badly, markets can react violently.
  • Timing: By far, timing is the most important element of trading economic data releases. In the current electronic marketplace, information is exchanged in seconds, and trades are executed in milliseconds. Knowing the exact time an item is to hit the news wires is critical to engaging the market successfully.

Referencing a futures economic calendar is extremely useful for staying on top of daily financial events. Many media outlets and brokers supply them free of charge, including Marketwatch, Econoday and Daniels Trading.

Here’s a small sample of influential economic events and the futures markets most sensitive to their public release:

Event Products Affected
Gross Domestic Product (GDP) Equity Indices, FX, Metals
Unemployment Situation Equity Indices, FX
Consumer Price Index (CPI) Interest Rates
EIA Petroleum Status Report Energies
WASDE Report Agricultural
FOMC Forecasts Equity Indices, FX, Metals, Energies, Interest Rates

How to Trade on an Economic Data Release

An economic data release acts as an outside stimulus to price action. Upon its dissemination to the public, market participation is bolstered. Although traders use many unique strategies for profiting from the action, two separate disciplines provide a framework for all: fundamental and technical analysis.

A methodology based upon market fundamentals is the traditional way to trade an economic data release. Under a fundamental approach, a trader interprets and uses the actual hard data to project future market behavior. For instance, if a report on U.S. GDP performance is lagging, an investor may take a short position in the U.S. dollar index to capitalize upon perceived future weakness.

Fundamental strategies typically employ longer time frames. The objective is to profit from a potential trend that the data suggests, not necessarily immediate price action.

The second way of trading an economic data release is through a strategy based upon market technicals. In contrast to the fundamental approach, a trader uses assorted technical tools and indicators in an attempt to profit from direct volatilities.

Entering trades from a technical perspective can be great way to benefit from the short-term price action a data release often provides. Playing bounces, breakouts or momentum scalping strategies are a few ways that a technical approach can harness the potential of enhanced volatility.

Putting It All Together

At first glance, developing a trading plan for markets in the midst of an economic data release appears easy. Simply identify the time of the release, products impacted, and apply an appropriate trade management strategy. Unfortunately, there’s a bit more to this process than meets the eye. It’s important to realize that while enhanced volatility provides opportunity, it also increases risk.

A good place to begin the development of a rock-solid trading plan for these conditions is dt’s online service suite. No matter your desired level of broker involvement, an experienced industry professional can help turn periodic volatility in your favor.

We’ve been assisting our clients in making sound trading decisions for over 25  years through bear markets, bull markets, and everything in between.  Trust a Daniels Trading broker to help you reach your trading objectives in  any market.

Filed Under: Ag Marketing

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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