Fundamental Analysis - Economic Indicators

Obviously, economic indicators are not the ONLY factor in fundamental analysis. But the economic health of any country is reflected in its currency. So economic indicators are a very important way to measure the economic health of a country and therefore to understand the way the currency is going to go. So economic indicators are important for Forex trading.

Economic indicators fall into two groups: leading indicators and lagging indicators. Leading indicators are economic factors that change before the economy starts to follow a particular pattern or trend, so they can be used to predict changes in the economy. Lagging indicators follow changes, so they can be used as indicators of what is already going on.

Economic indicators basically consist of snippets of economic data published by various agencies of the government or private sector of any individual country. They are published on a regular basis - this could be monthly, quarterly, half-yearly or yearly.

What is important in Forex trading is to know when these indicators are due to be released. Keep a calendar on your desk with the dates marked for the publication of each set of data. Because currencies are traded in pairs, you will need to do this for at least two different countries. For instance, if you are interested in trading USD/JPY, you will need to track the indicators of both the USA and Japan. Currency movements are meaningless in themselves - what you need to know is the movements of any given currency AGAINST another currency.

In the next post we will look at examples of some of the most important economic indicators. You can also find out much more about this in the tutorial materials provided by Easy-Forex. And there is more to find out about Forex at http://www.bizwrite.co.uk/Forex/forexindex.html