The Trading for beginners section provides information that is necessary to start trading forex and CFDs with confidence. This is a beginner’s guide that contains information about currency pairs, forex market, market analysis and CFD instruments.
There are many economic indicators that provide statistical information on the countries’ economic activity. As a rule, they are used mostly as predicted indicators to determine the future state of the economy. We will consider different types of economic indicators, the importance of their use during trading, and also tell you where to find relevant indicators for every country.
Economic indicators are planned releases of economic data, reports and announcements on leading factors in the financial sector. Economic indicators differ from each other in their place of origin, target audience and impact on the various financial markets. For convenience, we divided all the indicators by region: US indicators, European indicators and Asian indicators. You can find out about the upcoming economic events in our economic calendar.
Different indicators come out with different frequencies: daily, monthly or quarterly. Before the indicator occurs leading financial experts speculate about them, and traders base their trading decisions on these speculations. Economic indicators affect the market twice: first when announced, and second when compared to the speculations made before. A great difference between the speculation and the actual value can lead to significant changes in the market.Examples of economic indicators:
• Unemployment rate
• Interest rates
• Building permits
• Federal funds rate
• Gross Domestic Product (GDP)
• Income and wage levels
• Consumer price index (Inflation rate)
• Currency stability
• Corporate profit
• Trade balance
Each indicator can affect not only its own market. For example, if a government issued many building permits, it can lead to more jobs, decreasing in unemployment rate, higher consumption rate and, as a result, strengthening of the national currency.
Non-Farm Payrolls (NFP) is an indicator with a big impact, which is published on the first Friday of every month by the U.S. Bureau of Labor Statistics. It reflects changes in the number of employees in the USA compared to the previous month, except the agricultural sector. This is approximately 80% of the economically active population of the United States. An increase in the number of employees usually indicates the market growth. As a result, the American dollar is strengthening. If a trader made such a forecast and opened a buy position before the report, he will make a profit. Of course, if the number of employees decreases, the dollar will weaken. In any case, the NFP indicator and the speculations will cause changes in other instruments.
The most relevant indicator of the euro is the Interest Rate Decision announced by the European Central Bank (ECB). If the ECB raises the interest rate to prevent inflation, this will positively affect the euro, and the currency will strengthen. On the other hand, if the ECB keeps its current interest rate or reduces it, this will negatively affect the euro, and the currency will tend to weaken. If the actual value of the indicator matches the expected one, there will not be much impact on the market. However, if the actual value of the indicator does not match the expected one, this situation will have a greater impact on the market.
The Caixin Purchasing Managers’ Index (PMI) is a specific indicator that reflects the state of nationwide manufacturing activity, where special attention is paid to small and medium-sized companies. In December 2015, it became known that the PMI was lower than it was expected. As a result of this decrease, manufacturers reduced the number of employees, which led to a decrease in production volumes. Other types of economic indicators review the growth of supply and demand in the market and many other factors that affect markets, instruments, companies and traders in general.
The main success factor for most traders is a regularly updated economic calendar. It reflects all the important events and news that affect the forex markets and the economy of a specific country. Thanks to this calendar, you can understand why certain events occur in the markets. Also, the calendar will help traders to speculate market changes based on previous, actual and forecasted values. With the release of key economic data, such as the NFP indicator, GDP and so on, traders receive excellent trading opportunities.
In order to use economic indicators effectively, a qualitative market analysis is required. Some traders prefer simpler research, while others do a very thorough analysis. In any case, indicators can be a very useful tool, but the traders need to carefully monitor the economic calendar. As soon as a trader knows that a certain event should happen, for example, a country’s consumer supply and demand rate, he makes a speculation about the value of this indicator. Based on this speculation, the trader chooses an instrument for trading and decides which position to open: buy or sell. If the trader's speculation is true, he will receive a significant profit.
In order to make correct speculations about economic indicators, you need to have knowledge about the relevant markets and financial or general events that may affect the indicator. Once knowing all the related factors, a trader can speculate based on rational thinking.
Any trader, beginner or experienced, should constantly follow the economic calendar to find out which indicators are relevant for his transactions. So, traders can determine how to profit from transactions, so that it can exceed their expectations. You can practice using economic indicators here.
The term ‘order’ means a way to enter and exit a transaction. There are many different types of orders that can be set on the market. You can make a transaction at the current market price. In addition, you can create a conditional order for a transaction at a futures price, which may be higher or lower than the current market price. Learn about the types of orders that are available.
This order is most commonly used by traders. A market order is an order to buy or sell a financial asset at the current market price. It is executed when you open a position in the market. ICON INVESTING executes orders in real time.Pending order
Unlike a market order, a pending order is an order to buy or sell a financial asset at a futures price. The broker executes this order upon reaching the set price value. Examples of pending orders.Limit order
A limit order is used when traders expect a better price. A buy limit is a pending order to buy an asset at a price lower than the current one. A sell limit is a pending order to sell an asset at a price higher than the current one.Stop order
A stop order is used to buy or sell an asset when the price reaches a certain value. A buy stop is a pending order to buy an asset at a price higher than the current one. A sell stop is a pending order to sell an asset at a price lower than the current one.One cancels the other order
One cancels the other (OCO) order is an order that combines two previous types of order. An OCO order provides that when one order is activated, the second is automatically canceled. This type of order helps to manage risks and it is an effective trade strategy, because if you make a wrong trading decision, you will limit your losses.Take profit and stop-loss orders
These orders allow you to close a position at a predetermined price level. A take profit order allows you to save profits by closing a position when a certain price is reached. A stop-loss order allows you to minimize losses by closing a position when the price decreases. Take profit and stop-loss orders can be set to both market and pending orders.
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