Understanding fundamental analysis and the impact of economic indicators.
It doesn't matter if you trade currencies, stocks, indices or any other financial instruments, it is important to first get a complete picture of the situation in the related country. In particular, it is necessary to understand what forces influence the national economy and what type of news you need to follow first.
Indicators (news) in the Economic Calendar usually fall into one of the categories below:
Leading indicatorsIndicators of this type help to make a forecast about future country's economy changes. Any shifts in their values warn that we will soon see a similar negative (or positive) effect in other national sectors.
So you can predict, for example, the impending recession, as Central Banks representatives usually do: they determine in advance the vector of development and adjust the monetary policy by raising or lowering rates. The same data is used by private traders to adjust their strategies.
Among the leading indicators are:
Lagging indicatorsUnlike leading indicators, they reflect changes that have already occurred in the economy over time. Traders use these indicators to confirm market trends strength. Since the economy has already begun to move in a certain direction, one can open medium-term and long-term trades along with a general trend.
Coincident IndicatorsThis type of indicators offers important information about the current economic situation. Coincident indicators can give traders a detailed breakdown of current market trends, allowing them to tailor a strategy to a developing trend.