Forex Trading Factors: Economic Indicators

Category : Forex Trading

When beginning to invest in forex trading, there are certain economic indicators that provide hints about the state of each countrys economy. By paying attention to these, you are able to predict how that countrys currency will act in the future. These factors are usually provided in the form of reports that are released monthly, bi-monthly, semi-annually, or annually. They are easily available to the public and the most dedicated forex trading investors pay close attention to the information and statistics they provide.

What Economic Indicators Track

The data that these reports track involve sales of most consumer products but in particular the housing market. They also provide statistics about the rate of unemployment, the strength of other markets, and national reserves. One of the most important general economic indicators is how much money consumers are spending on non-essential items. If the average citizen has superfluous wealth to spend on leisure activities, it means that the economy is thriving and should mean that the country's currency is a safe investment for forex trading.

Why the Reports Matter

The importance of these reports is more relevant in the big picture than in the immediate impact. This means analyzing them as a continual change rather than a single source of data. For example, if you see that in one particular month a countrys housing market has dipped and overall sales are down, this does not mean the countrys currency is in decline. This could be caused by an aberration or it might have simply been a bad month.

How to Use this Data in Forex Trading

Instead of analyzing your forex resources for one specific month, make a graph that marks the progress or decline over the past six months. If the trend has been continuing in one direction for a substantial period of time, this could indicate a strong necessity to sell off that currency.

You can also compare the current bad month to past instances when similar dips occurred in order to see if there is historical precedence that would indicate a drop in value. If a similar event occurred previously with the same results, you could predict that a similar trend will emerge this time as well.

Many forex trading platforms provide links to these various reports so that they are readily available to their investors. Ask your forex broker where they are located on their website. And while you are checking out a forex site, open a forex practice account, a system that allows users to try their hand at forex trading without using their own money, so there is no risk.

About the Author:
Patrick Kalashnikov is a freelance writer who is very knowledgeable about forex trading, and how to get started with a forex broker. For more information about forex trading, visit http://vertifx.com

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