Information that changes the value of a currency pair, can come in many forms, but the most pertinent are economic indicators that help drive the forex market. Forex traders are always on the lookout for economic news indicators which they can follow to help them make more money during forex trading. Economic indicators can have a huge impact on the market; consequently, knowing how to construe and analyze the information they contain is very important for forex traders.
Economic Indicators are usually classified in several ways. The major types of economic indicators are leading, coincident and lagging indicators. Economic Indicators that predict future changes in economic activity are called leading indicators. Indicators that change simultaneously with the change in economic activity are called coincident indicators. And finally, indicators that confirm that a change in the economic activity has happened are called lagging indicators.
Economic indicators, or economic releases, are vital components to consider when making trading decisions. While some releases like Employment data or Retail Sales gives us a snapshot of an economy’s strength or weakness, some are a bit more subtle in their ways and can actually serve as a leading supposition of what’s to come for the main releases. In the spirit of trying to predict how the more important indicators will fare, here are some leading economic indicators that could give you a clue of how they will turn out.
When looking at economic releases, we have to realize that everything is ultimately related to the habits and actions of consumers: Retail Sales is a direct measure of how much consumers purchase; Gross Domestic Product is a direct measure of the capital spent by businesses and consumers; Employment is directly driven by demand to make product that is purchased by consumers; the list goes on. Taking that knowledge in effect means that it is incredibly helpful to have a measure of the optimism or pessimism of consumers, and surveys deliver that to us.
Each of the forex economic indicators can move the market up or down depending of the content. Although, it is very important to know how the specific change in indicators' value will impact the market. The key thing with all economic indicators and news releases is not just what the actual release means but how the market anticipates the release and subsequently reacts to it, this is where the trading opportunities are created. It can be extremely difficult for new traders seeking to trade news events as the volatility and uncertainty can be overwhelming, fortunately we have a fantastic suite of indicators which are perfect for trading news events.