Posts Tagged ‘coincident indicators’

Economic Indicators – Leading the World Part 2

Hello Friends here we come up with an extension of our previous blog, ECONOMIC INDICATORS… “Leading the World” Part 1.

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Economic Indicators - Leading the World Part 2

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In previous Blog, we had touched upon the aspect like

what are Economic Events & Indicators and important sources of data provider for calculating & determining economic indicators.

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However in this Blog, we would try to know about the classified categories of Economic indicators in details and what is Time Era.

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Classified Categories:

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1. Leading indicators:

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These indicators are to forecast trends of the overall economy.

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The indicators included in the figure are:

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interest rate spread, M2 money supply, average manufacturing work week,

manufacturers’ new orders, S&P 500, average weekly unemployment claims,

vendor performance, housing permits, consumer expectations and

manufacturer’s new orders for non-defense capital goods.

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2. Lagging indicators:

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An indicator to generate transaction signals or to confirm the strength of a given trend.

It is a measurable economic factor, for example, corporate profits or unemployment that changes after the economy has already moved to a new trend.

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3. Coincident indicators:

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It provides information on the current state of the economy.

For example, coincident indicators move up when GDP is growing and down when GDP is shrinking.

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This indicator varies directly with, and at the same time as, the related economic trend.

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The four economic statistics comprising the Index of Coincident Economic indicators are

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– Number of employees on non-agricultural payrolls,

– Personal income less transfer payments,

– Industrial production,

– Manufacturing and

Trade sales.

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Time Era:

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Knowing when each piece of information will be released is important to successful trading.

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The economic calendars are found on many websites.

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These figures helps to decide how to trade using these events, it can help explain unanticipated price actions during those periods.

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These indicators play a vital role in determining the trend or movement of the stock market & the commodities futures.

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It has been seen many times that when a positive data of these indicators like GDP or Industrial Production comes into picture & looks promising,

the trade of currencies like Euro, USD, INR; precious metals like Gold, Silver, base metals of Copper, Zinc, Lead show a positive move & short-term rally immediately.

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Stay Tuned for more and more on this 🙂

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However For More latest Industry,Stock Market and Economy News Updates, Click Here

ECONOMIC INDICATORS – A Key Factor in Currency Trading : Part 1

Economic Indicators – A Key Factor In Currency Trading

Economic indicators are the most concerning part of the currency trading which are released by various agencies of the government or private sectors.

These are published on a regularly scheduled basis which helps market observers to track the pulses of an economy.

They are hardly ignored by anyone who is the participant of the financial markets.

Economic indicators are procyclic and their movement, are directly proportional to the trend of economic performances.

With so many people poised to react to the same information, economic indicators in general have tremendous potential to generate volume and push the sentiments of the people to move prices in the markets.

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Tracking the calendar of economic indicators will also help the market followers to make sense out of otherwise unanticipated price action in the market.

Let’s talk what exactly an investor can derive from these indicators:

Suppose USD has been in a tailspin for three weeks and the trading day is beginning of the week i.e. Monday.

Now it is easily predictable that many traders are holding large short USD positions.

However on Friday the employment data is yet to be released.

It is very obvious that with this key piece of economic information as it is made public, the USD could experience a short-term rally leading up to the data on Friday as traders pare down their short positions.

This shows that these small but vital informative indicators directly or indirectly rules the trading terminal and affects the prices vigorously.

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These economic indicators are mainly helpful in top down approach followed by any investor.:)

They start their analysis with global economies including both national and international economic indicators as GDP growth rates, inflation, interest rates, exchange rates, productivity and energy prices as well.

The availability of good economic data is the major attention of international markets as they are the indicator of the countries economy which is the promising destination for foreign investors.

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Not only this the other releases like personal income, unemployment rate, housing starts, retail sales etc. which are also known as coincident indicators give an overview on future performance of the related country and its economic conditions.

These indicators are changing at the same time and in same direction as the whole economy moves, so they represent directly the current state of the economy. 🙂