LESSON 2 : UNDERSTANDING ECONOMIC INDICATORS IN FUNDAMENTAL ANALYSIS.

 Understanding economic indicator.

What is economics indicator, 

This refers to the data and statistics on the economy performance with it's health.

Classification of economic indicators.

  >>Lagging indicator

this are the indicator due to the market to follow the change after the economy had begun to follow the trend.thus situation occurs after Unemployment rate change (NFP) , Cooperate profits 

   Lagging indicator this is an indicator before the market to change to follow the trends , most help in developing future predicts in the market . Example stock market and building permits

   >>Coincident indicator >>this are indicator usually change at same time on to the economy and help to confirm the the current state.a good examples are GDP and Industrial production .

 Source of economic indicators...

The following are those areas where a trader can get the economic indicators.   The economic indicators come from different government agencies(Beural of labour statistics, census bureaul) , private organization, and international sources like IMF .

KEY ECONOMICS INDICATORS WHICH TRADERS AND INVESTORS TEND TO FOCUS MUCH IN FUNDAMENTAL ANALYSIS...

>>Unemployment rate change

this refers to percentage of people unemployed and are actively seeking for work .

How does unemployment rate change  affect the stock market ?

When the unemployment rate is high, the Fed decreases the interest rate, which in turn increases the stock market prices.

 The impact of the unemployment can give coisidence of strength in the stock market due to the better of the unemployment statistics.

  >>Concumer price index (CPI)

Play a role to measure the price of consumer basket , goods and services

How do CPI news have impact in the stock market

 Stock markets typically aren't moved as much by CPI data, but can be since higher interest rates can cause business activity to slow. In general stock markets prefer a lower CPI that allows consumers to keep spending, and business to continue investing.

HOW CAN ECONOMIC DATA RELEASE CAN CAUSE MARKET VOLATILITY

  >> Normally release such in Factory calendar according to economic data release cause market volatility.

    The following are impact of economic data release towards market volatility 

       1. Expectations vs. Reality , something you expected might not get into reality or the reality take the chance of your expectations in the trends in market 

      2. liquidity , 

      3.Herding behavior.

      4. Uncertainty.

Timing and release of economic data NEWS .

   There are specific time and areas which the releases are being provided you can get informed on the economy data release on the following sites 

1. Forex factory

2.XM education

3.Finance news (Bloomberg report, AUD Khabar, and Investing.com.

HOW TO INTERPRET ECONOMIC DATA RELEASE .

1.Understand data source.

2.Look for various indicators (GDP, unemployment rate change, inflation rate etc.

3.Consider historical context (historical average and trends)

4.Watch the consesus  forecasts (analyst which are pro and economists )

5.Asses the market reaction.

6.Consider the long term and short term reaction.

7.Look for correlation.S8S.Seekexpert opinions.

Screenshot of NFP NEWS SEPTEMBER 2023

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LIMITATIONS AND RISK FOR ECONOMIC INDICATORS IN THE INVESTMENT 

>> Economic indicators don't always tells the full story of Economy.

>>Measuring Gross domestic product , is almost impossible.

>>They need to be correctly interpreted.

>>They do not predicts future correctly.

Don't miss the lesson 3