PostHeaderIcon Understanding Economic Indicators

Effective and successful trading usually also involves looking at various indicators to get the current state of the market. With many indicators probably affecting certain markets in one way or another, there are certain ones that generally may provide traders with a means to gauge what direction a market may be proceeding. Economic indicators may provide a way for them to consider risks and opportunities that may be available in trading markets.

Economic Indicators

Basically, economic indicators are certain economic statistics that provides an indication of how a certain economic environment is doing, whether bad or good. This will provide traders with an idea of how the economy is going to fare in the future. Economic statistics such as unemployment rate, inflation rate and Gross Domestic Product of a country may provide an indication whether a certain market will be doing better or worse in the next coming weeks or months.

Economic Indicator Attributes

There are certain attributes that make economic indicators quite valuable to traders and investors in terms of the data that they provide. One of the attributes is on how the said economic indicator is related to the business cycle. An economic indicator may be something that moves in the same direction as the economy. It can also be an indicator that moves in the opposite direction.

Another attribute of economic indicators that prove valuable to traders is the frequency of available data. The more frequent economic data is updated, the better gauge they may be to determine market direction. Another attribute of economic indicators useful to traders is the timing of its effects.

Certain economic indicators affect economies differently in terms of timing. Some such indicators may change first before any changes in the economy can be seen. There are also economic indicators that won’t change until several months or quarters after an economy experiences certain changes. There are also indicators that seem to move in time with the changes in the economy.


Comments are closed.