An analysis of different economic and business indicators for traders to help them in forecasting Forex.
Welcome to our fundamental analysis article on forex trading indicator theory. An economic indicator or business indicator is recorded data that gives an insight into the position of the economy as a whole says Forex Racer. Economic indicators are recorded and used for the analysis of the current economic situation and also for the prediction of future economic changes. Currency indicators are used to analyze Forex performance and play a major role in forecasting future foreign exchange and future Forex performance. Forex traders use currency indicators to dictate important entry and exit points.
Economic indicators can include various elements of nonprofit reload and loss reports as well as a summary of economic activities. These can be subdivided into summaries of unemployment statistics, inflation measures, production results, breakout reports, gross domestic product summaries, broadband Internet penetration, retail sales, currency market prices, and money supply events. Economic indicators are identified and named in three categories:
Early, Late and Matching Index
are indicators of currencies that change before the change in the market or in the economy has occurred. Examples of forward indices may include unemployment rates, inventory changes, stock prices, and insurance claims. Economic institutions and central banks analyze forward indices in anticipation of expected interest rate changes. A forward rate indicator is an indicator that tells the trader to buy before a new trend begins in the market. Forward looking indices, by nature, are difficult to identify and can lead to misleading results if not analyzed by an experienced trader. The main benefits are obtained at the beginning of the market trends and the advanced indices are therefore of inestimable value to experienced traders.
Lagging Forex Index
are those that indicate events that took place after a change or pattern has occurred in the economy or in the market. Examples of lagging indicators may include unemployment, corporate benefits, and even changes in interest rates. The interest rate is a lagging indicator that will change only after the occurrence of major market changes. The media is an important lagging index for both the economy and the foreign exchange market. News is always reported after an actual event brings the changes in market prices.
A lagging index is a technical indicator that informs the trader that a new trend in the market has already started. They are more reliable than forward indicators as they show the new market trend after it has started. The disadvantage is the loss of profit as the trend has already matured.
Related to Forex, a lagging index is a technical index that follows the change in the price of an underlying asset. This indicator can be used to attract interest in the transaction or be used to test the strength of a given trade.
Matching indices
consist of indicators that change over time with the main variations in the economy and therefore provide insights into the current state of the economy as a whole. Examples of matching indices include gross domestic product results, personal income figures, industrial production results and retail sales figures. Matching indices are used as records to analyze peaks and valleys that occur during a previous cycle in the economy. The three types of business indicators mentioned above should be explored by traders, to equip them with the necessary insight to excel in the foreign exchange market.
We hope that you enjoyed our Forex Fundamental Analysis article and that you now feel more confident about Forex economic indicators.
