How Does the Market React to Revised Values in the Calendar?

In one of our studies, namely “Does the trading signal work based on the forecast value?”, the effectiveness of such a signal at the moment of publication of the forecast has been revealed.

Today, we will study the reaction of the foreign exchange market to the publication of revised values ​​of economic indicators. And let's see if it's worth relying on them when deciding to enter the market.

Revised values ​​are usually published along with new facts, sometimes with a slight delay.

Let’s consider the following scenarios:

1. Comparison of the current values ​​of the published indicators with the previous ones:

• current data are better than previous ones;
• current data are worse than previous ones.

2. Comparison of the revised values ​​of the published indicators with the previous ones:

• the revised value is better than previous actual one;
• the revised value is worse than previous actual one.

Let's compare the approaches and determine which one is more profitable.

Trading strategy:

- enter the market after the publication of the event (news) on 15-minute candlesticks according to the expected reaction of the instrument to the event (for more details, see the appendix):

• 0 (candlestick 0, the moment of the event publication),
• 15 minutes (candlestick 1),
• 1 hour (candlestick 4),
• 2 hours (candlestick 8).

- exit from the market on close of candlestick from the list below after entering:

• 1 hour (candlestick 4),
• 2 hours (candlestick 8),
• 3 hours (candlestick 12),
• 4 hours (candlestick 16),
• 5 hours (candlestick 20),
• 8 hours (candlestick 32).

A total of 48 entry/exit combinations.

The following currency pairs by country have been taken for the study:

Analysis of the obtained results 

We will evaluate the results according to the following criteria:

• The rate of return reflects the relative change in the quotes of financial instruments in percentage. A positive value of the rate of return indicates the profitability of the strategy, negative - about a loss.

The rate of return (R) of a financial instrument is calculated using the formula:

where:

n - the number of transactions;

P (%) – the percentage of change in the quote of a financial instrument at the time of fixing a position, is calculated as follows:

for buy positions

P (%) = (position closing price - position opening price) / position opening price * 100%

for sell positions

P (%) = (position opening price - position closing price) / position opening price * 100%

Let's take the notations.

1. The market entry/exit combination by candlestick number:

2. Current / Previous - a method of comparing current values ​​with previous ones.

3. Revision / Fact - a method of comparing revised values ​​with previous actual values.

The results are presented in the diagrams.

Detailed results are shown in the Appendix:

XLSX (0.18 MB)How Does the Market React to the Revised Values in the Calendar.xlsx