Technical analysis indicators appeared quite a long time ago, and many of them were used even before general computerization. For example, the well-known Ichimoku was developed in Japan in the 30s of the twentieth century. Naturally, at that time there was no talk of automatic calculations. Therefore, work with the indicator was carried out exclusively manually.
Technical analysis indicators are algorithms that allow you to obtain data on future prices using quote data over a certain period of time.
Each technical analysis indicator is based on a certain formula. It is with its help that the calculation takes place. Depending on the type of indicator or its purpose, the formula may vary. For example, one calculates average prices for a certain period, the other calculates closing or opening prices of the market, and so on.
With the advent of computers and large-scale computerization, indicators gradually migrated to computers. Now all calculations are carried out automatically, which has greatly simplified the trader’s work.
Technical analysis indicators are very popular among traders. This is partly due to the fact that all the calculations are done by a machine. The trader receives only the result, which he puts into practice. The result of the work of most indicators (precisely most, but not all) is the receipt of a specific signal for action - buying or selling an asset.
The basis of how indicators work
Oscillators become useless during trending periods. Accordingly, it is necessary to use some kind of tool in order to understand when work in the range ends and trading within the trend begins. (Gator Oscillator)
(Market Facilitation Index, MFI)
How to work with indicators
Technical analysis indicators are necessary mainly for short-term traders who prefer to work in a short time frame. Investors who trade long-term are not interested in using technical algorithms, as they prefer fundamental analysis.
On our website you can connect different indicators and see how they work, but brokers, of course, have trading terminals more possibilities, including a larger set of indicators, as well as the ability to connect third-party, new indicators.
In order to start using this or that indicator, you must, at a minimum, study information about it and understand how its formula works. This is very important, as it will allow you to determine in the future in which situations it is worth considering the indicator signals, and when it is better to abstain.
Most indicators can be customized independently to suit your preferences, for example, change the indicators of intervals and periods. As a result of such manipulations, it is possible to significantly change the indicator readings, making it more or less sensitive.
There are no ideal settings, so the trader will have to adapt to a specific situation. In general, they work great on the default settings, and if you want to change settings created by professionals, you must understand exactly what you are doing.
Technical analysis indicators have long become an integral part of it. They form the basis not only of manual strategies, but also of automated advisors. Not a single deal on professional market cannot do without technical analysis and indicators.
Technical analysis indicators provide many possibilities, but it is important to remember the successful component - always combine different indicators to obtain the most reliable signal.
If one indicator tells you about a trend reversal, that’s good, but when 2 more indicators tell you about it, that’s even better.
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What is fundamental analysis in Forex?
Fundamental Analysis Forex is different in that it is based on the assumption that price changes are caused by the influence of various fundamental factors in the economy, while technical traders believe that it is enough to analyze the price itself.
For short-term traders, a fundamental approach to Forex analysis is a rather futile exercise.
The main disadvantages of fundamental analysis of the Forex market include complexity. External factors, which influence the price, there may be twenty or fifty in one state, and they can all be interconnected, and some of these connections may be contradictory.
Therefore, adherents of fundamental Forex analysis are a small percentage of traders who, at the same time, cannot boast of a deep understanding of this method.
Fundamental market analysis is
Many traders believe that the essence of fundamental analysis is waiting for the release of some news or event. No, this is careful and painstaking work with many fundamental aspects.
For example, here are the fundamental indicators that can affect exchange rates:
- GDP and other indicators economic growth
- Trade balance
- Domestic market money supply
- Inflation rate and inflation expectations
- Interest rate level
- Trust in the global market
- Labor statistics indicators
And other indicators.
What is fundamental analysis of the Forex market
What is fundamental analysis?
Even a novice trader knows that successful trading depends on how strongly the market moves. The strongest fluctuations occur during economic or political movements in the world.
Very often it is possible to predict such events, because they depend on many other factors.
Fundamental analysis deals with precisely such market movements. With its help, you can predict exactly how someone will react to such important political or economic events. This type of analysis will provide significant support in the bidding process.
Fundamental analytics and its benefits
This type of analysis can be used not only by fundamental traders.
Fundamental analysis will show only the general direction of the trend, which depends on the main political and economic factors. At the same time, technical analysis will be able to evaluate these changes from a practical point of view. It will tell you, for example, the time to enter and exit a trade. Fundamental and technical analysis work together quite effectively.
Global events can pose a danger, first of all, to already opened transactions. Very often the market moves completely unpredictably, so you need to be careful.
On the other hand, this is a good opportunity to increase your income very quickly. If the forecast is correct, you can open a trade at the maximum favorable conditions. In order not to suffer losses, you should be aware of major world events and know the political and economic mood of the most powerful states.
Performing analysis manually can be a very time-consuming process, which is where Forex fundamental analysis software can help. In this article we will look at the most effective automated programs for.
Fundamental analysis of Forex and its main indicators
Economics is a science of dynamics, not statics. is more important than a single value, precisely because the market has expectations. Fundamental analysis is a good opportunity to determine the trend.
Liquidity is not a random term. Capital within a country fuels the value of the currency. Capital varies. The simplest example is money.
Money flows from country to country, from economy to economy, as in communicating vessels, only the laws of physics are slightly different. The laws of monetary physics say that most money goes where it grows at relative speed and in relative safety.
Speculators will prefer speed, investors - safety, but neither one nor the other likes economies where capital grows slowly and at risk. This way you can understand where, where and when money is moving, and therefore which currencies will sink and which will strengthen.
In order not to overload the introduction, in this article we will give only one example, but perhaps the main one fundamental Forex indicator, which is on everyone's lips. An indicator that can hint at the potential of a particular economy is GDP.
GDP and Forex Fundamental Analysis
Gross domestic product is the value of all goods and services produced by an economy. Annual - for a year. Per capita - divided by the number of citizens of the country.
GDP is not a perfect Forex indicator based on fundamental analysis, but it makes up for this with its wide coverage. It’s worth making a special reservation; people often forget that the market is not only about demand, but also about supply.
If, as the quantity and cost of goods and services produced by a country increases, the demand for these goods and services does not increase correspondingly, a type of economic bubble is inflated.
Thus, growing GDP in itself does not mean the strength of the economy. This is an important lesson - the vast majority of macroeconomic indicators must be considered comprehensively, and not isolated one at a time.
GDP per capita, in turn, is also a rather mediocre indicator from the point of view of measuring the well-being of the population. In 2014, for example, Russia's nominal GDP per capita was $24,800, and the average annual wage, for reference, $12,000 at the then exchange rate.
So, let's interrupt this macroeconomist subconscious stream for now and stop with the question: do you like to think about markets as part of something much larger? How about manifesting the economy into something quantifiable and tangible?
Yes, fundamental research is more the lot of a long-term investor than a short-term speculator, but these fundamental Forex strategies also have their own certain advantages.
How to conduct fundamental analysis of Forex trading
In the Forex market, fundamental analysis helps make decisions about long-term investments in currency and regarding trading on news.
When analyzing fundamental indicators, it is necessary to consider:
- what data does the specific analyzed one consist of?
- what class does this fundamental indicator belong to?
- when does this indicator come out - in what periods or time
- analysis of fundamental indicator fluctuations
- the influence of the indicator on other indicators, and vice versa - how other fundamental indicators can affect the analyzed one.
Fundamental Forex analytics and factors on which income depends
The goal of any trader is to multiply his and decrease his trades when making transactions. Before you start working on foreign exchange market, you need to decide on your trading strategy.
To create it, you must take into account all the factors on which your income depends.
The main thing is the direction of trade, the entry and exit points of the transaction, as well as the indicator. For the accuracy of a possible forecast, it is better to take two types of analysis as a basis:
- technical
- fundamental.
Now we'll figure it out best programs for fundamental Forex analysis and help you understand the very essence of this analysis.
Fundamental analysis of the securities market and Forex Calendar
The simplest, but very effective program that every trader can use is Forex. Its task is to remind you of the dates of main events and their details. This could be time, power of influence and other analytical information about a particular event.
Admiral Markets offers maximum data on the world's most important events with our convenient . Here you will understand the principle of using this calendar.
The first thing the calendar will ask you about is your time zone. You need to select the zone of your location by clicking on the corresponding column. After this, decide on the time period that you want to analyze using fundamental analysis. You must determine this option yourself, to your taste.
After these manipulations, a list of events that should be expected in a given period will appear. This could be information, for example, about press releases government agencies or bank details.
Anything that will have a very strong impact on Forex will be marked in red, a moderate impact will be marked in yellow, and events that are unlikely to have a strong impact on market movements will be marked in green.
The Forex fundamental analysis program will show the frequency of certain events. For example, if some green events occur very rarely, but their impact is aimed at one currency, then their combination can have a very strong impact, which is comparable to a red event.
Thus, you should look at the calendar very carefully, because the overlap of even minor events can result in a serious market movement.
In addition, compare the two closest values for the same currency - past and future. This way you will understand how the orientation of the currency movement has changed and next time you will be able to predict these values.
Different types of traders use analysis for different purposes. Let's say a fundamental trader will sell an asset if the price rises before the news is released. The remaining traders will trade the breakout.
For fundamental analysis, the Forex calendar, with all its functions and tools, will be very useful to you. But this is far from the only program with which you will improve your Forex trading several times.
Fundamental analysis of the Forex market - OCA Orders
The order system does not analyze fundamental events, but a fundamental trader can use the system in his work. You will most likely find OCA orders in the plugin.
If not, please submit a request to Admiral Markets to update the updated edition of MT4 to provide access to the OCA order.
One Cancels Another - translated as “cancellation of one by another.” This name describes what the order system does. While working in it, you can set up one of two limiting orders at your discretion: Buy Limit and Sell Limit. By launching one order, the system will automatically cancel another.
With this option, the fundamental trader will save his funds, and the results of transactions will be positive.
Independent fundamental Forex analytics or analysis using a program - what to choose?
Of course, you can independently conduct a fundamental analysis of all events that will in one way or another affect the market movement. It could be good experience, given that such knowledge is interesting in itself.
However, such a labor-intensive process can be replaced by automated programs. The most popular on this moment, the Forex calendar remains. With its help, you can apply analysis very effectively. In second place in terms of success is the informer program and the OCA order.
However, many traders are constantly interested in political and economic situation in the world, so they are able to provide no less accurate market analysis and forecasts, such as those provided by professional analysts. Such traders do not need additional programs for fundamental analysis.
One of the main reasons why you don't often come across fundamental Forex analysis programs is that many traders don't trust their results. Usually they use only tools for technical analysis, and few traders and brokers hear about fundamental analysis.
Of all the programs that we looked at today, the Forex calendar seems to us to be the most efficient. Its features include sending notifications and closely tracking news releases.
A calendar can be quite a useful assistant for your trading strategy. You must trust it completely, so quality, reliability and speed of response will be the decisive factor.
Fundamental analysis of the Forex market and its role
Your knowledge of the economic and political situation in the world can become a valuable source for analyzing market movements. They will help you increase your income and minimize your risks.
This approach will especially appeal to traders who do not trust fundamental analysis. However, every technical trader should not stay away from news releases. Even if you don't trust fundamental analysis, try making a forecast yourself or ask a more experienced trader for advice.
During important world events, the market will be in strong movement, and you simply will not understand in which direction the fluctuation is planned. Or don’t risk it at all and leave trading for another time.
Forex fundamental analysis is not an easy methodology, especially for beginners.
It is very difficult to cover all aspects of fundamental analysis and carry it out for one trader. But at the same time, it should be understood that even a simple but thoughtful analysis of economic factors can help in trading, for example, by identifying long-term trends.
Admiral Markets invites you to use our convenient so as not to miss important events that may affect your trading.
We also recommend that you test all new strategies on the risk-free one, which reflects all movements real market. If you decide to try yourself as a fundamental trader, start by practicing with virtual funds before switching to.
Forex Fundamental Indicators
Economic indicators can significantly influence Forex and CFD prices. Therefore, many traders keep a close eye on the market to ensure they are aware of any developments that may affect volatility levels.
Just as technical analysis studies use time-valued data and statistical models superimposed on them, it uses economic data as initial data and considers them from the point of view of macroeconomic theories.
We will explore exactly how to relate certain indicators according to established macroeconomic theories.
Every day, macroeconomic indicators are published around the world.
Some of them are more important, others less. Many macroeconomic indicators are only derivatives of gross domestic product.
What are Economic Indicators or Forex Fundamentals
Around the world, various governmental and non-governmental organizations regularly publish certain economic data. The methods by which these reports are generated can vary significantly.
Sometimes the data is as simple as reporting monthly sales from a specific segment of the economy. Others may be based on opinions recorded in surveys.
Some indicators will tell you about the current state of the economy; others can confirm what happened to the economy in the past or predict what will happen to the economy in the future. The latter, known as leading economic indicators, are of particular interest to traders as they provide a better idea of the likely outlook for the economy.
Indicators that tell us about the current state of the economy are called coincident indicators. Those that confirm what has already happened are called lagging indicators. All three have their own capabilities and can influence the Forex market in different ways.
Source: Admiral Markets
Let's look at the best fundamental indicators of the Forex market.
Fundamental Analysis - Indicators and Inflation
In simple and understandable language, inflation is the ratio of demand to supply for money within one country.
Let's look at a couple of examples where these fundamental Forex indicators are used.
Case one: central bank, following the government's instructions, leads the round money issue to stimulate the cooling economy. The monetary base is growing, the demand for currency is falling, and inflation is rising.
Case two: after an external economic shock (say, a fall in prices for exported raw materials), panic arises in the consumer market and people run to exchange rubles for dollars.
The demand for rubles is falling, they are becoming cheaper. This is also inflation. In fact, inflation is measured by the rise in price of a certain consumer basket, but you must clearly understand that the causes of inflation can vary significantly, as shown above, and rise in price in itself is not inflation.
Go ahead. It is important to understand that inflation is a double-edged sword. Each economy, depending on its unique factors, independently determines the optimal level of inflation necessary to continue economic development.
For “catching up” economies (BRIC countries), this figure is usually within 7-10%. For “developed” countries (USA, EU, Japan, etc.) the optimum is at the level of 2%. The problem is that the former cannot pacify inflation, and the latter cannot accelerate it.
Since the market is based on expectations and forecasts, in determining the impact of inflation, it is not so much the figure itself that is important, but how much it differs from the desired level, and how much it differs from the predicted level. The inflation delta, if you like.
Unfortunately for the average trader, when it comes to fundamental indicators, it is often impossible to say unambiguously what leads to what. It is always necessary to consider a complex of data taking into account the type and state of the economy.
In the classical interpretation, the higher the inflation, the cheaper the currency. It's logical. However, history knows of cases (and more than one) when developed economies suffering from deflation, the increased emission of money only led to greater deflation - money flowed out of the country through.
Forex Fundamental Indicators - Interest Rate
The key interest rate is the percentage that the central bank charges commercial banks to “rent” its currency. From key rate, all other bets also occur - from real estate mortgages to quick loans.
This is also quite logical, because if your bank borrows from the Central Bank at 10%, it can no longer lend to you at less than 10%.
For the Central Bank, the key interest rate is main tool in regulation, or rather, attempts to regulate financial situation in the country.
This is also quite logical. The higher the interest rate, the less desire everyone has to borrow money, the lower the inflation.
The financial governments of many countries already practice so-called inflation targeting. This is when the Central Bank, by changing the interest rate, tries to achieve a given inflation level.
It would not be an exaggeration to say that together - inflation and the key interest rate tied to it - are the main macroeconomic indicators, which means they are the main indicators of fundamental analysis.
Clear fundamental indicators on Forex
In this subtopic, without getting carried away, we will consider several fundamental indicators, the nature of whose influence on the exchange rate is relatively clear, such as GDP and the unemployment rate.
GDP as a fundamental Forex indicator
Gross domestic product is total cost of goods and services produced within one economy, and at the same time one of the most important fundamental inducers that measures its development.
Fundamental Indicators - Forex Economic Indicators - Nonfarm Payrolls (NFP)
For most Forex and CFD traders, this is the most important monthly indicator on the calendar. It is published on the first Friday of each month by the Bureau of Labor Statistics (BLS), along with the unemployment rate (which is the next metric on our list) as part of the Employment Report.
The report has the opportunity to significantly influence the movement of the Forex market. The one-minute chart of EUR/USD below illustrates such a move.
The yellow vertical line indicates the release of the jobs report, which took place on July 7, 2017. Look how dramatically the price moved in just one minute! Also notice how much larger the average range of each bar becomes after the report is released compared to the previous one. 
Source: MetaTrader 4, EURUSD chart
Why does it have such a big impact on market prices?
Part of the answer lies in the timeliness of the report. Employment and the business cycle are closely linked, and, historically, changes in nonfarm payrolls have moved very closely to quarterly changes in GDP. The crucial difference between the two is that nonfarm payrolls are issued monthly, reporting on the month that ended just a few days before. GDP is reported quarterly and with a long lag.
The other part of the answer is the impact the report has on monetary policy. Maximum employment and stable prices are two of the Fed's three monetary goals. It follows that employment data can have a major impact on market perceptions regarding future direction monetary policy.
Foreign economic fundamental indicators Forex
There are only a few countries in the world today that live behind a complete, thick economic curtain like North Korea.
What does this mean? This means a closed economy.
Nothing is exported, nothing is imported. Neither goods, nor services, nor ideas. No one is investing outside the country, and no one is investing from outside the country.
The population is content only with what it can produce itself, and National currency nothing more than candy wrappers for outside world- it is not quoted on the world market.
The majority of the world's population has a rather weak idea of the level of integration of their national economy into the world economy, although every day they eat bread, part of which consists of imported grain, drive a foreign car and pay for everything in currency, the stability of which is partially guaranteed by the volume of oil exports, which can only be extracted renting technology and equipment abroad.
The two most important indicators that can complement the perception are the trade and payment balances - the last two fundamental Forex indicators, which we will consider in detail in the first part of the article.
Let's make a special reservation. As soon as we start talking about fundamental indicators that are influenced not only from within, but also from outside one country, the certainty disappears.
Trade balance as a fundamental Forex indicator
The trade balance is the ratio of exports to imports. A trade surplus - when the total value of goods exported is greater than the total value of imports - means that a country is selling more than it is buying, which is generally good news.
It is quite obvious that if in an exporting country, a significant part of whose GDP and budget directly depends on exports, there is a slowdown in export growth, then, all other things being equal, this will lead to a slowdown in growth.
For the importing economy, everything is exactly the opposite. The more imports there are when there is already a negative trade balance, the greater the burden on the budget.
As a rule, a negative balance indicates the uncompetitiveness of export industries, and this is a clearly negative signal.
However, there are several countries that are quite comfortable as balance importers. They succeed in this in different ways, but high level economic development is in this case an obligatory factor.
Some, like the United States, issue additional financial (other than currency) that attract foreign capital, evening out the balance of payments.
Others, such as the Netherlands or Switzerland, provide international services, which makes them, as it were, exporters of services, again leveling the balance of payments.
Balance of Payments as a Fundamental Forex Indicator
The balance of payments is revenues to expenditures across the state, including the above-mentioned Balance of Trade, Balance of Services, various types of investments, as well as reserve assets.
By adding up the final balance, it becomes clear whether the country needs to increase (negative balance) or decrease (positive) its debentures before partners - other countries.
Obviously, a country's inability to make ends meet, which encourages it to borrow abroad, is a sign of economic weakness, but even in such a situation, with stable financial institutions, the demand for that country's currency can continue to grow, which means the currency itself will strengthen.
Let's look at the remaining Forex fundamental analysis indicators.
One of the most frequently used terms in this article will be the word “parity”. Parity is nothing more than the equality of two quantities.
Economic indicators on Forex as fundamental analytics - Consumer Price Index (CPI)
The CPI measures the cost of goods and services, linked by an index to a basic starting point. The indicator gives us objective information about how quickly prices are rising or falling.
When inflation is within target levels (currently 2%), it is considered normal or even desirable. However, if inflation is too far from the target, it can have a very negative impact on the economy.
Since inflation directly affects monetary policy, the CPI report can have a strong impact on prices in bond, foreign exchange and stock markets.
Typically, deviations from expected results have the greatest impact. For example, if the consumer price index is much higher than expected, this will cause the Fed to be inclined to tighten monetary policy in the future.
Other than that equal conditions This is an optimistic sign for the US dollar. Similarly, a CFD trader may interpret such inflation data as bearish sentiment for , as monetary tightening leads to a curb in risk appetite.
Consumer Confidence Index/Michigan Consumer Sentiment Index
In fifth place on our list are two reports. The Conference Board's Consumer Confidence Index and the University of Michigan's Consumer Sentiment Index. There are many consumer surveys, but these two are the best known and most widely used by economists and Forex traders.
Consumer confidence lets us know how consumers are feeling. If they feel confident in their work and are optimistic about their future economic prospects, what can we think? It makes sense that they might be more inclined to go out and spend.
This will promote economic growth. Because consumer optimism or pessimism have such powerful implications for the economic outlook, these two reports should feature on any list of leading economic indicators.
The Consumer Confidence Index comes out at the end of the month, and the University of Michigan publishes its research twice a month. These reports tend to have the greatest impact on the Forex and stock markets when the business cycle is about to turn. Thus fundamental analysis stock market and Forex necessarily takes them into account.
Strong consumer sentiment points to possible economic growth in the future and this is driving bullish sentiment for stocks. Weak consumer sentiment is a bearish signal for the stock market. Fundamental analysis of stocks will allow you to monitor these signals.
The University of Michigan study comes out more frequently. However, the Conference Board report represents a broader range of respondents, suggesting greater statistical reliability. Both correlate fairly well with turns in the business cycle, but are heavily influenced by the labor market.
If unemployment remains high while other parts of the economy recover, sentiment may remain subdued, acting as an indicator of underperformance in such circumstances.
Forex Economic Indicators - Utilization of Production Capacity
This indicator measures how the US manufacturing sector is operating as a fraction of full capacity. The definition of full capacity is the highest level of sustainable output a plant can achieve. In other words, it takes into account things like normal downtime. It is calculated as the ratio of the industrial production index (above) divided by the total capacity index.
Fundamental Analysis financial markets this type gives us timely data on production/economic health as well as insight into trends that may be emerging in the manufacturing sector. It can also provide information about inflation. If factories are running hot, it's reasonable to assume that manufacturers might raise prices.
If factories are running below maximum capacity, machines are likely to fail as a result of overwork. Taking machines offline creates the risk of laying off workers during periods of high demand, which is not desirable. Accordingly, manufacturers are more likely to cope with high demand by raising prices rather than by insulting workers. This, in turn, will most likely lead to consumer prices, and we'll get higher inflation.
Conversely, if capacity utilization works at low levels, this means economic weakness. Typically, rates below 78% have historically indicated a coming recession - or may even mean the economy is already in recession.
As such, this indicator is used by the Fed to measure trends in manufacturing, the broader economy, and inflation. This makes it an important indicator for CFD traders, especially those trading bonds, but is also a key marker for those involved in the stock and foreign exchange markets.
Summing up: fundamental groups of Forex instruments
In conclusion, I would like to note that economics is an empirical science, where, unfortunately, there are no test sites for conducting experiments. In this sense, we experiment on ourselves. New data appears daily, but their reliability is often questioned, given modern dynamics development of world trends.
Efficiency claims are more or less open markets, to which the rest of the world is gradually following Europe and America, fundamentally contain a grain of chaos.
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Market traders Forex traders can be divided into several groups, in accordance with the forms of financial market analysis they use.
There are investors who prefer only technical analysis, there are also those who coordinate their transactions with data fundamental analysis. But the greatest success in the market is achieved by those who take the time to combine both types of analytics.
Today we will tell you about the main indicators that are used in fundamental market analysis Forex.
Typically described as a method for assessing a specific securities in order to determine its value by analyzing financial and economic indicators. In the Forex market, this security is a unit of a particular currency.
Investors constantly analyze the latest statistics of a particular country and, thus, determine the value of the national currency. There are several basic economic indicators used in fundamental analysis that any trader who expects a good return on their investment should be familiar with. Changes in these indicators usually lead to a rise or fall of a particular currency.
Interest rates
Interest rates are most significant an indicator that can influence the value of a currency in the long term. Most central banks in the world announce interest rates every month. Forex traders monitor the decisions of these financial regulators very closely.
Interest rates are the lever with which central banks control the volume of circulation money supply in the national economy of the country. If the central bank intends to increase the money supply, then interest rates are decreasing. To reduce the money supply, interest rates must be raised.
Gross Domestic Product (GDP)
GDP is also one of
Inflation
Inflation is that phenomenon in the economy of any country that simply “eats” real purchasing power population. Therefore, in the vast majority of cases, inflation has a bad effect on the national economy. Acceptable annual inflation rates are around 2-3%. However, if inflation rises beyond the target level, the value of the currency will eventually rise as the market anticipates an inevitable rise in interest rates. Higher interest rates are a mechanism that helps fight inflation over a certain period of time.
Unemployment rate
It is the working population of the country that is the main engine economic growth Therefore, the unemployment rate is the basis for the development of the country's economy. If the unemployment rate increases, this has a very negative impact on the rate of economic growth of the state. As a result, if the labor market situation is unfavorable, then commercial banks very often lower interest rates on their loans in an attempt to increase the amount of money in the economy and thereby stimulate economic growth of the country as a whole.
Consumer demand
As already noted, the pace and volume of economic growth depend on the country’s citizens. Normal level consumer demand is the key to healthy and successful functioning of the economy. If consumers need goods and services, then National economy develops. Conversely, in the absence of consumer demand, economic development is hampered.
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For fundamental analysis of the foreign exchange market, as well as any of the stock or
commodity markets use data published for this purpose from special
analytical reviews, as well as graphs and tables of numerical indicators
for fundamental analysis. The latter are usually published monthly (with the exception of data on the gross national product and the employment index, published
quarterly).
Any indicator for fundamental analysis is a pair of numbers.
The first number is the indicator for reporting period. The second number is the refined
indicator for the month preceding the reporting period. For example, in July
economic indicators are published for June (reporting period). In addition to them in the report
include the value of the same indicator for May. This is done for the reason that
institution responsible for collection economic statistics, gets by the time
publication of the indicator for June, more complete information for May, which is very important
for traders. If, for example, the value of an economic indicator for the last month
0.4% better than expected and the figure for the previous month was adjusted less
than 0.4%, a trader can make a reasonable conclusion about a shift in the state of the economy.
Economic indicators are released at different times. In the USA they
usually published at 8:30 a.m. and 10:30 a.m. Eastern Time. Important
remember that most information about foreign currency released at 8:30 am.
Therefore, the US foreign exchange market opens at 8:20 am in order to have time for
studying the latest data necessary for fundamental analysis.
Information on economic indicators is published in all leading newspapers,
such as the Wall Street Journal, Financial Times, and New York Times and business magazines,
such as Business Week. There is reason to believe that traders are actively using electronic
sources - Bridge Information Systems, Reuters or Bloomberg - to get how
information from newspapers and from available sources of current information.
Below we discuss individual groups of indicators for fundamental analysis
in accordance with their generally accepted classification.
Economic Indicators
Gross national product(The Gross National Product)
.
Gross
national product (GNP) characterizes the perfection of the economy as a whole. This
the indicator consists, on a macro scale, of the sum consumer spending, investments,
government spending and net trade. When determining GNP, we proceed from
the sum of all goods and services produced by the US population both domestically and internationally
border.
The Gross Domestic Product.
Gross domestic
product (GDP) is the sum of all goods and services produced in the United States as
domestic and foreign companies. The difference between GNP and GDP is that
concerns the US economy, is nominal. GDP indicators abroad are more than
popular. IN THE USA GDP indicators published to facilitate comparison
economic indicators of different countries.
Consumption Spending.
Consumption is possible as for
personal account and from net income. The consumer's decision to spend or
maintaining them is psychological in nature. Consumer Confidence
- this is also an important indicator of the propensity of consumers with disposable income to
move from saving money to consumption.
Investment Spending Index.
Investment—or gross
private domestic investments—consist of fixed investments and the cost of goods at
warehouses
Government Spending Index.
Index government spending is very important both in itself and in terms of its impact on
other economic indicators. For example, US defense spending before 1990 played
important role in overall employment in the United States. The subsequent reduction in military spending led to an increase in the figures for a short time
unemployment.
Net Trade Volume Index.
Net trading volume isanother important component of GNP. Global internationalization and
economic and political events since 1980 have had a strong impact on
US ability to compete with foreign countries. Education for
In recent decades, the US trade deficit has slowed GNP growth. GNP depends on
commodity flows and from financial flows.
Industrial Sector Indicators
Industrial Production Index.
Characterizes
volume of total production of national industrial, municipal and
mining enterprises. From the standpoint of fundamental analysis, this is important
economic indicator reflecting the strength of the economy and, indirectly, the strength of the domestic
currencies. For this reason currency traders use this indicator as
potential signal for making trading decisions.
Capacity Utilization Index.
Characterizes the total volume of industrial production related to the total
production capacity. By the latter we mean the maximum level
production that an enterprise can achieve under normal business conditions. IN
In principle, the use of power is not among the indicators important for the foreign exchange market
applies. However, there are examples when using this indicator from the standpoint
economics was useful for fundamental analysis. Its "normal" value for
stable economy is 81.5%. If it is 85% or more, it is evidence
“overheating” of industrial production, i.e. that the economy is close to achieving
maximum power. A high degree of power utilization precedes inflation, and
the foreign exchange market raises expectations that the central bank will raise the discount rate,
to prevent or reduce inflation.
Factory Orders Index.
Characterizes the total volumeorders for durable goods and non-durable goods (TCH). TO
the latter include food products, clothing, light goods
industries and products intended for servicing durable goods
use. Orders for the latter are discussed separately. For foreign exchange market traders
with industrial orders is of limited significance.
Index of orders for durable goods (Durable Goods Orders). Index of orders for durable goods (TDP) characterizes production output
with a service life of more than three years. Examples of such products are cars,
stationary equipment, furniture, jewelry and toys. These products are divided into
four main categories: products of metallurgy, mechanical engineering, electrical and
transport engineering. To eliminate the impact of volatility inherent in volume
military orders, when determining this indicator, defense products are taken into account separately.
This indicator is quite important for the foreign exchange market, since it gives a good
perception of consumer confidence. Since TDP are more expensive than TCP, high
the indicator value reflects consumers' spending intentions. Therefore for
Forex market, this indicator value is bullish.
Inventory index (Business Inventories). Based on the cost of the items,
produced and stored in warehouses for subsequent sale. Collect one
information is not difficult and is not something to hit the market with. Besides,
the achieved level of financial management and universal computerization ensure
high degree of control over warehouse goods. Therefore, the importance of this indicator for
The foreign exchange market is limited.
Technical analysis indicators play a fairly important role in the work of a modern trader. The very purpose of indicators is to simplify as much as possible the analysis of the huge amount of information presented on price charts. Therefore, now it is hardly possible to find a trader who has not heard of such a concept as technical analysis indicators.
Thanks to the use of computers, the use of indicators has been simplified as much as possible for modern traders. In order to attach one or another of them to the chart of any financial instrument, just click a couple of buttons on the control panel of the trading terminal. The terminal will automatically calculate all parameters (according to the specified settings) and display a convenient and easy-to-read indicator chart.
A trader only needs to know how to correctly interpret the readings of a chart issued in this way in order to isolate reliable ones from them. trading signals for the purchase or sale of the financial instrument in question.
Below are the most popular (and therefore present in the tools of almost every trading terminal) existing indicators.
This is perhaps the most popular indicator of all existing ones. The moving average is designed to smooth out the price chart and identify the main trends on it. It is calculated in such a way that each point provides information on prices for a certain period of time. This period of time is called the moving average period.
Price chart with moving average
That is, at each point of the moving average it is calculated average price for the time interval specified in its settings. The longer this interval (period), the smoother the moving average and the less it reacts to small, insignificant price movements. On the contrary, as the period decreases, the moving average becomes more and more sensitive to each next surge (or trough) on the price chart.
The MA period is selected in such a way that, on the one hand, random fluctuations (volatility) of the price chart are ignored, and on the other hand, truly important price changes are not missed.
The simplest interpretation of the readings of this indicator comes down to analyzing its intersections with the price chart. If the price crosses the moving one from bottom to top, then this is a signal to buy. On the contrary, when crossing from top to bottom (the price crosses the moving average from top to bottom), we are talking about a signal to sell.
There are several types of moving averages:
- Simple Moving Average (SMA)
- Weighted Moving Average (WMA)
- Exponential Moving Average (EMA)
- Modified Moving Average (MMA)
As practice shows, the best results are shown by the simple moving average (SMA).
MACD
A very popular technical analysis indicator based on the convergence and divergence of two moving averages with different periods. There are two options for presenting this indicator: linear and histogram. A linear representation in the form of two lines - “fast” and “slow”, and a histogram in the form of columns showing the distance between these two lines at each moment in time.
Price chart and MACD indicator MACD abbreviation from EnglishMovingAverageConvergence/Divergence, which literally means the convergence and divergence of MA (moving averages) was developed by the founder investment company Signalert Corporation by Gerald Appel and was intended to analyze the strength and direction of the trend, and in addition, to identify turning points on the price chart.
A signal to buy is the intersection of the fast line with a slow one from bottom to top, and a signal to sell is a similar intersection from top to bottom (that is, when the fast line crosses the slow line from top to bottom).
MACD divergence (divergence between the indicator chart and the price chart) is considered a fairly strong signal. Good results are obtained by using MACD during sideways market movement (flat) and on large time frames (weeks, months). On small timeframes this indicator gives too many false signals.
Read more about the use of this indicator, as well as its main advantages and disadvantages.
Due to its simplicity and ease of interpretation, the momentum indicator has become widely used among traders. Momentum is calculated as the difference between the current price of the financial instrument in question and the price of the former price a certain period of time ago. This period of time is called the period of the momentum indicator. In fact, momentum is equal to the profit (or loss) received over a given period of time for the purchase of one unit of the financial instrument in question.
Momentum indicator on the price chart Technically, this indicator shows the presence or absence of a trend, as well as the direction of this trend. Positive values of the indicator indicate an upward trend, negative values indicate a downward trend. A change in the indicator sign indicates a change in trend.
The main signals of this indicator are when it crosses the zero mark. That is, when momentum changes its sign, thereby indicating a change in the prevailing trend at a given moment in time. When the sign changes from plus to minus (the trend changes from upward to downward) it is a signal to sell, and when, on the contrary, from minus to plus (the trend changes from downward to upward) it is a signal to buy.
Learn more about the momentum indicator.
RSI (relative strength index) literally translated from English means relative strength index. The popularity of this indicator is due to the ease of its interpretation. Using RSI, traders assess the strength of a trend, as well as the likelihood of it changing.
One of the strongest signals given by this indicator is divergence. Divergence is the discrepancy between the price chart and the indicator chart. In other words, if a new extremum forms on the price chart, but this extremum does not appear on the RSI chart, then this indicates high probability trend changes.
RSI on the price chart
The Volume indicator, unlike the above technical analysis indicators, does not give signals to buy or sell. It is an auxiliary tool and helps to assess the strength of a particular trend.
Volume is translated from English as volume. And this indicator shows, respectively, the volumes of transactions completed in each individual period of time**. The more volume a trend is supported by, the greater the strength and likelihood of its continuation.
Price chart with Volume indicator In particular, the Volume indicator is used to confirm technical analysis patterns. For example, when the well-known “head and shoulders” pattern is formed, an increase in volume in areas of falling prices and a decrease in volume in areas of growth is a powerful signal confirming the truth of this figure.
This indicator is also well used to establish the truth of a level breakdown. If the breakout is accompanied by an increase in Volume, then this indicates its truth, and conversely, a decrease in volume after the breakout indicates that the breakout is most likely false.
** For the Forex market, the Volume indicator does not show the volume of transactions, but the number of ticks of price change. Therefore, in the foreign exchange market it is often called tick volume.