How to calculate diviation from forex news forcast
Calculating deviation from a Forex news forecast involves analyzing the difference between the predicted market movement and the actual market movement after the news event. Here's a step-by-step guide to help you calculate deviation:
Step 1: Gather necessary data
- Forex news forecast: Collect the predicted market movement (e.g., 50 pips up or down) from a reliable news source or a Forex forecasting service.
- Actual market movement: Record the actual market movement (e.g., 30 pips up or down) after the news event.
Step 2: Calculate the absolute deviation
- Calculate the absolute difference between the predicted and actual market movements: |Predicted movement - Actual movement| = Absolute deviation
For example, if the predicted movement is 50 pips up and the actual movement is 30 pips up, the absolute deviation would be:
|50 - 30| = 20 pips
Step 3: Calculate the percentage deviation
- Calculate the percentage deviation by dividing the absolute deviation by the predicted movement and multiplying by 100:
( Absolute deviation / Predicted movement ) x 100 = Percentage deviation
Using the same example:
(20 / 50) x 100 = 40%
This means that the actual market movement deviated from the predicted movement by 40%.
Step 4: Interpret the results
- A smaller percentage deviation (e.g., 10-20%) indicates that the actual market movement was close to the predicted movement.
- A larger percentage deviation (e.g., 30-50%) indicates that the actual market movement deviated significantly from the predicted movement.
- A very large percentage deviation (e.g., 60% or higher) may indicate a significant surprise or a major market reaction.
Example calculation
Predicted movement: 50 pips up Actual movement: 30 pips up Absolute deviation: |50 - 30| = 20 pips Percentage deviation: (20 / 50) x 100 = 40%
In this example, the actual market movement deviated from the predicted movement by 40%.
Tips and considerations
- Use a reliable news source or forecasting service to ensure accurate predictions.
- Consider the market conditions, such as volatility, liquidity, and market sentiment, when analyzing the deviation.
- Keep in mind that news events can have unpredictable outcomes, and even the best forecasts may not always be accurate.
- Use this calculation as part of a larger analysis, including other technical and fundamental analysis tools, to make more informed trading decisions.
By following these steps, you can calculate the deviation from a Forex news forecast and gain insights into the accuracy of the prediction and the market's reaction to the news event.