Saturday, 1 March 2008

Further Tips on Making the Best Use of Economic Data

In the last post we looked at some hints for making sets of economic data work for you in Forex trading. Here are one or two further things to remember:

  • Concentrate on the finer points of the data, rather than the headline figure of each set of data. For example, the PPI (Producer Price Index) measures changers in producer prices of different commodities. However, experienced traders will know not to pay so much attention to the food and energy components of the data set. This is because they are aware that these components are so volatile that they do not provide an accurate picture of economic conditions.

  • Remember that economic indicators usually contain revisions to previous data sets. So although we said in the previous post that the importance of figures lies in the extent to which they fall outside market expectations, be aware that an unexpected rise could be the result of a downward revision to the previous month. So look at revions to older data before you use this as a basis for making a trade.

  • Never forget that there are two sides to a trade in Forex trading. You always trade one currency against another. Therefore you must pay attention to the economic data from both of the countries whose currencies you are trading. Remember that not all countries are as efficient as the USA or Europe in releasing their economic information so you have to be careful about judging how much weight in the market the data from each country will carry. Always do your homework.

If this all seems difficult and complicated, don't forget Easy-Forex will give you plenty of help if you are trading with them, and you can also get help on many aspects of Forex trading at