Governments gather and tabulate mountains of statistics and release dozens of economic reports every day. Sometimes the task is not so much getting fundamental information but sorting out that which is relevant to prices.
Economic statistics are made public on a regularly scheduled basis and help market observers monitor the pulse of the economy. Because they are so closely followed by almost everyone in the financial markets and frequently draw a market reaction, the first thing you should know about these fundamental snippets of information is exactly when they will be released. Most brokerage firms produce economic calendars, or you can get the date information on the internet. Knowing when a key report such as U.S. employment is due to be released may help to explain some market moves.
You may not be a fundamental analyst, but you should have some sense of what the economic data is revealing about the economy. You should know which indicators measure the growth of the economy (Gross Domestic Product) and which measure the inflation rate (Producer Price Index and Consumer Price Index). You don’t have to be an economist, but after a while, you should become familiar with shifts in the major economic indicators. Some are much more important to traders than others, and that importance may change over time as the markets key on different reports at different times.
Remember the admonition earlier in this tutorial: The actual numbers often are not as important as traders’ expectations and whether the data falls within the boundaries of what the market is anticipating. A couple of other caveats should be mentioned about economic reports if you use them in your fundamental analysis:
Economic indicators published for other countries may not mean the same thing as a U.S. indicator does. If you are going to trade currencies, for example, you should know what is covered in economic reports from another country and how that might differ from the same type of statistic in the United States or in Germany.
Fundamentals Tutorial
Economic statistics are made public on a regularly scheduled basis and help market observers monitor the pulse of the economy. Because they are so closely followed by almost everyone in the financial markets and frequently draw a market reaction, the first thing you should know about these fundamental snippets of information is exactly when they will be released. Most brokerage firms produce economic calendars, or you can get the date information on the internet. Knowing when a key report such as U.S. employment is due to be released may help to explain some market moves.
You may not be a fundamental analyst, but you should have some sense of what the economic data is revealing about the economy. You should know which indicators measure the growth of the economy (Gross Domestic Product) and which measure the inflation rate (Producer Price Index and Consumer Price Index). You don’t have to be an economist, but after a while, you should become familiar with shifts in the major economic indicators. Some are much more important to traders than others, and that importance may change over time as the markets key on different reports at different times.
Remember the admonition earlier in this tutorial: The actual numbers often are not as important as traders’ expectations and whether the data falls within the boundaries of what the market is anticipating. A couple of other caveats should be mentioned about economic reports if you use them in your fundamental analysis:
- What is mentioned in the media headlines often may not be what is really important in the data. Don’t just jump on the headline figures to make a trading decision.
- Statistics are frequently revised. A current number that appears to be a big surprise may just have resulted from a previous figure that was revised, giving a misleading impression about the size of any change in the new data. Look beyond the current report to see what was done to previous reports and see how the latest figure compares historically.
Economic indicators published for other countries may not mean the same thing as a U.S. indicator does. If you are going to trade currencies, for example, you should know what is covered in economic reports from another country and how that might differ from the same type of statistic in the United States or in Germany.
Fundamentals Tutorial
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