Knowing what the data means can help you make smarter trades, before and after the data is released. Below are some of the primary pieces of data that successful Forex traders follow.
What are the Key Indicators?
Forex Traders can gauge the financial health of a given country (and its currency) through its economic data. But, just like a doctor monitoring a patient’s vital signs, the information is not equal in terms of its impact. Here’s a primer of the key economic indicators that often impact currency traders.
Economic indicators divide into leading and lagging indicators:
Leading indicators are economic factors that change before the economy starts to follow a particular trend. They’re used to predict changes in the economy.
Lagging indicators are economic factors that change after the economy has already begun to follow a particular trend. They’re used to confirm changes in the economy.
Major Economic Indicators
Gross Domestic Product (GDP)
The sum of all goods and services produced either by domestic or foreign companies. GDP indicates the pace at which a country’s economy is growing (or shrinking) and is considered the broadest indicator of economic output and growth.
Industrial Production
A chain-weighted measure of the change in the production of the nation’s factories, mines and utilities, industrial production also measures the country’s industrial capacity and how fully it’s being used (capacity utilization).
The manufacturing sector accounts for one-quarter of the major currencies’ economies, so it’s critical to watch the health of factories and whether their capacity is being maximized.
Written by Finexo.com