Investors in Forex rely on two types of analysis, fundamental analysis and technical analysis, that are used in all trading markets. In Forex trading, fundamental analysis means looking at how the economy of a country can or will change the value of its currency. A fundamental analysis of the Forex Market looks at several things. One of these things is economic indicators, which are reports that the government and private companies put out at set times. These reports show how a country's economy is doing, and they cover things like unemployment rates and housing statistics, among other things.
Forex traders pay the most attention to four important reports: the Gross Domestic Product, Retail Sales, Industrial Production, and Consumer Price Index. Gross Domestic Product is the broadest way to look at a country's economy, and most investors think of it as a "lagging indicator." The Retail Sales report looks at how much money all retail stores in a certain country made in total sales. This is a good sign of how much people in a certain country spend, and this report is seen as a timely sign. The Industrial Production report shows how the country's production has changed, which can be a good sign of how the economy is doing in that country. The Consumer Price Index tracks how the prices of more than 200 different types of goods and services change over time.
Forex traders also use the Producer Price Index (PPI), the Purchasing Managers Index (PMI), the report on durable goods, the report on the employment cost index (ECI), and the report on housing starts. All of these reports come from the government, but there are also a lot of private reports that Forex traders find very useful. The Michigan Consumer Confidence Survey is one of the most well-known private reports. It, along with other private and government reports, can be very helpful if they are used correctly.
Forex trading is based on different government and private reports that show the state of the economy and other factors that may affect the economy of a country or government. To keep from losing money on the market, you must know how to read these reports. If you know about economic trends and factors and how they affect a certain economy, you can make more money and take less risk when trading on the Forex market.
All rights reserved. Copyright (c) 2007 Joel Teo.
