What is the role of economic indicators in forex trading? let's answer this question with a simple explanation.
What is an economic indicator?
An economic indicator is an economic statistic data use to assess the good condition and performance of a specific economy and also the global economy.
Economic Indicators provide valuable insight about different aspects of an economy.
Economic indicators play an important role in forex trading by providing you with valuable insights about the good condition and future direction of a country's economy, which have strong influence on the value of it's currency.
- Interest Rate.
- Inflation Rate.
- Gross Domestic Product (GDP).
- Unemployment Rate.
- Trade Balance.
Important Economic Indicators:
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Information about a currency Value:
The value of a currency informs you about a country's economic condition.
A strong economy which constitute high GDP growth , reduced unemployment rate and a stable inflation rate will result to high currency value.
A weak economy will result to low currency value.
Envisage Currency Movements:
Currency Movements prediction are done by economic indicators. They do the leading indicating job by give potential information about the future changes in currency values.
A rising interest rate can cause an inflow of foreign investments.
inflow of foreign investments will result to increase in demand for a country's currency, which add more value to the country's economic conditions.
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Trade Analysis For Informed Trading Decision:
To have an insight about currency movements, most traders use economic indicators. This will help them to get informations about currencies value.
Traders analyze currency movements using economic indicators and use the insight to make trading decision.
Traders use insight gathered from economic indicators to guide them when to buy or sell a currency pair for profit as a result of fluctuations in exchange rates.
What Economic Indicators Do for you:
You can get information about the performance of a specific county's economy or gobal economy, which will help in making financial and investment decisions.
Setbacks Of Economic Indicators:
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Economic Indicators are not reliable or perfect predictors of currency moments
Exchange rate can be affected by market sentiment, Geopolitical activities and unforseen circumstances or news.
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The data they give out might be delayed and this can affect your trading decisions during real time trades in a live market environment.
Yes it is true that economic indicators are important tools for forex traders which offer them valuable information on currency movements.
Economic Indicators most be used together with other technical and fundamental analysis approach for a good comprehensive understanding of the forex market before making trading decision.
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