Making use of financial indictors in the Forex news to make good decisions
Those who deal in foreign exchange currencies always analyze the Forex news. The most important info. would be the financial indicators which are published by the government agencies and the private sector. The reason for this is so you can see exactly the current status of the economy of any given country. A financial indicator can change prices because people tend to react to what appears and this creates dealing volumes. The problem for a novice trader is that there are a lot of financial indicators to analyze but only a few of them are actually important at a certain point of time. For example, when we observe a rise in prices in a country the financial indicator to be analyzed is inflation.
Additionally, when we observe employment issues we have to analyze employment information and GDP reports. We can find two different types of financial indicators: lagging and leading indicators.
- Leading indicators are financial factors that will change before we observe the economy following certain trends.
- Lagging indicators are financial indicators that change after a trend is followed by the economy.
Basically, a leading indicator helps in predicting changes whilst a lagging indicator helps in confirming changes.
Key financial indicators in Forex news
Right, let’s take a look at financial indicators which stand out as the most important and used by foreign exchange dealers in order to make the appropriate decisions.
First there’s the GDP (Gross Domestic Product), which is basically the widest measure we have at our disposal to determine the financial growth of a country. The indicator tells us how quick a country gains or loses power. It’s calculated by adding the complete amount of goods and services that a country creates in 1 year. Bigger time frames can create even more statistics for a more detailed analysis. GDP is a lagging indicator as it changes after a country’s economy follows a trend.
Foreign exchange experts also analyze the industrial production, which shows us the changes that are noticed in the industries like factories, mines and utilities. It’s also an excellent indicator of how a country makes use of its capabilities and the complete industrial capacity. When we observe that the industrial production is arriving at a peak the foreign exchange will definitely be affected. The manufacturing sector seriously affects big players in the economy.
We should also analyze the CPI (consumer price index), the measure of an average price which is paid out by urban clients for fixed sets of goods and services. You can find over two hundred categories which are reported concerning changes in the price. User charges and taxes that are related with goods and services are also considered. CPI tells us just how much money is lost or gained in the production of the goods and services.
You definitely want to take a look at the PPI (Producer Price Index), a mirror of an average selling price change which domestic producers display in agriculture, electric utility sectors, manufacturing and mining.
Most of the PPIs for crude, intermediate and finished goods are used for financial analysis reasons.
Each time you make use of the Forex news you have to understand the followed trend. That’s the key, secret, to making the best decisions you can.