The importance of a trading calendar is often overlooked by those actively in the market. The key to successful trading is being organised and layering multiple tools and skills on top of each other and a comprehensive trading calendar and knowing what is coming is an integral part of that. Tune in this week on why trading calendars are so important and how to set one up:
Broad Market Focuses
In uncertain market periods, investors look to the release of economic data to gauge where the market is at, and where it might be headed. Major data points can have major impacts on the market and quite often it is the risk you were not aware of that is the biggest. Host Andrew Baxter notes that there are some key ones you should be on the lookout for, particularly now when economic conditions are the main focus. Consumer Price Index and Producer Price Index come to mind, along with employment data and housing starts. Standalone, these fragments of data do not provide all the answers, but by combining them all we can try to deduce where we think the market might be going and position ourselves around that. Adding these dates to your trading calendar will ensure you are not taken by surprise when these key data figures could heavily impact your portfolio. Thankfully, release dates are generally advertised, giving you ample opportunity to make sure those key dates are in your calendar.
Positioning Yourself in the Lead Up
Depending on what sort of investor or trader you want to be, there are different ways to position yourself ahead of these major announcements. If you’re in the stock space, Host Andrew Baxter suggests closely watching for any inflation data such as CPI, PPI or other official inflation figures. We have seen inflation wreaking havoc with the cost of living as well as in the stock market. Without specifically targeting stocks, you can take advantage by trading on the volatility or on what you may think occur within the bond market. When we see pressures in the economy for central banks to increase interest rates, we will generally see bond prices come down and thus bond yields move higher. There is a US security with the code TBT which tracks the movement of bond yields in the market and you can use this as a way of trading on these major news events without necessarily exposing yourself to individual stocks. Likewise, you can trade volatility by way of VIXY or UVXY in predicting whether the market will become more or less volatile. Higher volatility also gives us a chance for improved cash for options in the market which is another thing we can use to our advantage. Hedging is another method we can use to protect ourselves against any major news events that may impact our positions. Either using options or simply entering into an ETF that is short on the overall market could be effective as a means of protecting ourselves should we see some downside in the market.
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