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Thursday, September 1, 2011

Economic Indicators

An economic indicator or business indicator is recorded data that gives insights into the stance of the economy as a whole .Economic indicators are recorded and used for the analysis of the current economic situation and also for the prediction of future economic changes. Forex indicators are used to analyze Forex performance and play a major role in future Forex forecasts and future Forex performances. Forex traders use forex indicators to dictate major entry and exit points.

Economic indicators may include various elements recharging profit and loss reports and summaries of economic activities. These can be subdivided into summaries of unemployment statistics, measures of inflation, production results, bankruptcy reports, gross domestic product summaries, broadband internet penetration, retail sales, forex market prices, and money supply events. Economic indicators are identified and named in three categories: Leading, Lagging and Coincident.


Leading Indicators
Leading indicators are foreign exchange indicators that change before the change in the market or economy has happened. Examples of leading indicators may include unemployment index, inventory variations, stock prices and insurance claims. Economic institutions and central banks analyze leading indicators in anticipation to changes in expected interest rates. A forex leading indicator is an indicator that tells the trader to buy before new trend in the market begins. Leading indicators, by nature, are difficult to identify and might lead to misleading results if not analyzed by an experience trader. Major profits are made in the beginning of market trends, and leading indicators are therefore invaluable for experienced traders.


Lagging Indicators
Lagging foreign exchange indicators are those that indicate on events that took place after a change or pattern has already occurred in the economy or market place. Examples of lagging indicators may include unemployment, corporate profits and even changes in interest rates. The interest rate is a lagging indicator because it will change only after important market variations. The media is an important lagging indicator to both the economic and forex market. News always breaks after the actual event that will bring variations in market prices.

A Forex lagging indicator is a technical indicator that informs the trader that a new trend in the market has already begun. They are more trustworthy than leading indicators as they show the new market trend after it has begun. The disadvantage is the loss in profit as the trend has already matured.

Related to Forex, a lagging indicator is a technical indicator that follows behind the price variation of an underlying asset. This indicator can be used to attract transaction interest or be used to test the strength of a given trade.


Coincident Indicators
Coincident indicators consist of indicators that change in time with current major economy variations and therefore provide insights into the current state of the economy as a whole. Example s of coincident indicators includes Gross Domestic Product results, personal income figures, industrial production results and retail sale figures. Coincident indicators are used as records to analyze peaks and troughs that occurred during a previous economy cycle. All three types of the above Business indicators must be explored by traders, to equip them with the vision needed to excel on the forex market.

1 comment:

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