Economic indicators generate volatility, providing some of the best trading opportunities. Economic indicators serve a crucial role in identifying current and future trading possibilities and include a wide range of data, ranging from the Consumer Price Index (CPI) to crude oil prices, consumer confidence surveys and housing starts.
Economic indicators can be categorised into three main groups: leading, lagging and coincident.
Leading indicators
Leading indicators are used to forecast future economic trends and activity.
Lagging indicators
Lagging indicators confirm trends and changes in trends, providing information that follows an event. The unemployment rate is one of the most reliable lagging indicators.
Coincident indicators
Coincident indicators, such as interest rates and retail sales, provide real-time data that reflects ongoing economic activity within a specific area or region. This data frequently aligns with specific economic events.
While numerous economic indicators provide valuable insights into an economy’s health and potential trading opportunities, smart investors understand the significance of utilising multiple economic indicators simultaneously rather than relying on just one. Through the collection of data from various aspects of the economy, traders gain a wider understanding of the market. In turn, this enables them to make more informed decisions when trading forex online.
