Economic indicators create volatility and for that reason they provide some of the best opportunities for trading. As a piece of economic information, economic indicators are useful to identify current and future trading possibilities. As mentioned here, they can be anything from the Consumer Price Index (CPI) to the price of crude oil or consumer confidence survey and housing starts.
Economic indicators are separated into three categories: leading, lagging and coincident.
Leading indicators
Leading indicators are used to forecast future economic activity.
Lagging indicators
Lagging indicators, such as unemployment rate and GDP rates, provide information that follows an event and comes after large economic changes.
Coincident indicators
Finally, coincident indicators such as interest rates and retail sales are real-time data that show the activity of a particular area or region and coincide with specific economic activities.
While various economic indicators provide useful information on a specific economy’s health as well as trading opportunities, the truth is that wise investors utilise multiple economic indicators at the same time and avoid relying on only just one. By gleaning multiple sets of data from different aspects of the economy and combining it to gain a wider understanding of the market, traders are able to make better decisions when trading forex online.
