For Forex traders, life can be full of new challenges and adventures and even a small wrong step can lead to a big trading catastrophe. In the fast-moving world of trading, huge moves can appear from nowhere without any warning. The price changes in this industry are subject to various factors that alter due to geopolitical changes or natural disasters. That’s why traders need to watch out for various economic indicators to know what’s up in this ever-changing industry. But why do traders keep an eye on those indicators? It is because these indicators often give you clues as to what the market may look like in the future. These indicators can often make an upward trend go down overnight. That’s why dealers are never safe to think that a trend will remain constant for several days.
Knowing about these indicators can be extremely profitable if investors can apply them wisely. Many traders often forget to look at these fundamental indicators which ultimately drives the market. For these reasons, every dealer should have proper knowledge about these indicators to set up a long-term successful career in this market.
Below, we have talked about three of the most popular technical chart patterns and indicators to help you understand them better.
This is an economic indicator used to calculate value of produced goods and services provided by the citizens residing in a given country. The GDP of a country mainly denotes the economic condition of that country. It shows how much a country has developed over a particular time period, usually a year. It doesn’t only show the development, it also shows if the economy has weakened or not. Not every economy will have the same rate of development each year. Sometimes, the GDP goes upward, downward, or sideways.
GDP includes all the financial sectors of a country, like, agriculture, business, services, etc. Those who are new to the market, can read more about the fundamental events at Saxo. In fact, you can easily see the price change in a demo environment and study the impact GDP news has on certain instruments.
Now, the contribution of each sector together combines to form the GDP. So, no matter what the sector is, if the overall GDP of a country increases, we can say that the economy is booming. However, on the other hand, if the indicators go downwards, then we can say that the economy has faced a crisis. Now, the condition of an economy directly influences the value of its currency. The value of currencies of developed economies is comparatively high while the value of currencies of developing economies has been making an effort to improve their positions in the market.
2. Central Bank Rate Decision
Each country has a central economy and that central economy is responsible for determining the price of its currency. Whatever the central bank decides regarding monetary policies is the final decision and no other authority can have a say on that. Each month, the central bank releases the interest rates of a currency, and based on that the value of the currency changes. If the value determined by the central market becomes high, then the demand for that currency increases. On the other hand, if the value determined is low, then demand decreases. The central bank makes such decisions taking account of factors like monetary inflation.
The Consumer Price Index is an important news release that can allow the consumers to know the price of any commodity, especially daily commodities. Now, this indicator is used to measure the inflation of any currency. When the price of commodities becomes lower, then there arises a chance of facing inflation. Too much inflation is never good for an economy. That’s why before investing in any currency pair, investors tend to take a look at the CPI to learn about the condition of an economy.
The key thing about all these indicators is that they are all subject to news releases and cause a severe change in the price movement. So, making decisions by analyzing these indicators can help any trader to remain on the front lane in this competitive industry.