Fundamental analysis Macroeconomic indicators Trading on the news

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

Elena Berseneva 28 june 2022 67 4

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.

Hypothesis
To conclusion

The rate of return of transactions based on a signal obtained by comparing the revised and previous actual value is higher than the rate of return of a signal obtained by comparing the new actual value with the previous actual value.

К выводам

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.

Data used

Economic calendar: MarketCheese


Timeframe: 15 minutes (M15)


Historical data: 01/01/2015 – 09/30/2020


Economic events of eight countries:

  • The USA: 46 events
  • Australia: 9 events
  • The Eurozone: 16 events
  • The UK: 17 events
  • Switzerland: 6 events
  • Japan: 2 events
  • New Zealand: 15 events
  • Canada: 6 events.


Financial instruments: 5 currency pairs each with USD, AUD, EUR, GBP, CAD, NZD, CHF, JPY.


A total of 50,956 market entries.


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


USA
Australia
Eurozone
UK
Canada
New Zealand
Switzerland
Japan
EURUSD
EURAUD
EURUSD
EURGBP
USDCAD
NZDUSD
USDCHF
USDJPY
GBPUSD
GBPAUD
EURGBP
GBPUSD
GBPCAD
EURNZD
EURCHF
EURJPY
AUDUSD
AUDUSD
EURCAD
GBPCAD
AUDCAD
NZDJPY
GBPCHF
AUDJPY
USDJPY
AUDJPY
EURJPY
GBPJPY
CADJPY
AUDNZD
AUDCHF
GBPJPY
USDCAD
AUDCAD
EURAUD
GBPAUD
EURCAD
NZDCAD
NZDCHF
CADJPY


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:


Exit \ Entry
0
1
4
8
4
0-4
1-4
4-4
8-4
8
0-8
1-8
4-8
8-8
12
0-12
1-12
4-12
8-12
16
0-16
1-16
4-16
8-16
20
0-20
1-20
4-20
8-20
32
0-32
1-32
4-32
8-32


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.

Conclusion

The values of economic indicators are not always reviewed and not for all events.


Based on the revised, and not on the previous values of the indicators, it is possible to slightly increase the rate of return of transactions when entering the market 15 minutes after the publication of the event and exiting 1, 2 or 3 hours after the entry.


However, in this case, the rate of return of transactions does not reach a significant value of 0.1%.



The effectiveness of the revised values of indicators in the market forecasting has not been identified.

Detailed results are shown in the Appendix:

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

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