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Fundamentals Of Forex Trading

Forex trading investors rely on two types of analysis that are generally used in all the trading markets, fundamental analysis and technical analysis. Fundamental analysis in Forex trading involves taking a look at the economic conditions that can or will affect the value of the currency of a nation. There are several factors involved in a fundamental analysis concerning the Forex Market, and one of these factors are economic indicators, which are reports that the government and private companies release at scheduled times. These reports give an indication of the economic health of a country, and they cover everything from unemployment figures to housing figures, among others. The four major reports that are most closely watched by Forex traders are the Gross Domestic Product, Retail Sales, Industrial Production, and the Consumer Price Index reports. The Gross Domestic Product report is the widest measure of the economy of a country, and most investors consider this report a lagging indicator.

The Retail Sales report evaluates the total sales receipts for all retail stores in a specific country. This is a good indicator of consumer spending for a particuliar country, and this report is considered a timely indicator. The Industrial Production report gives a good indication of the changes in production for the nation, as this can be a sign of the economy for that country. The Consumer Price Index measures the price changes of consumer goods across more than two hundred categories of goods and services. Some other economic indicators that are used by Forex traders include the Producer Price Index, or PPI, the Purchasing Managers Index, or PMI, the durable goods report, the employment cost index report, or ECI, and the housing starts report.

These reports are all issued by the governments, and there are also plenty of private reports as well that are extremely useful to Forex traders. The Michigan Consumer Confidence Survey is one of the most popular private reports, and it can be extremely useful as well, along with other private and government reports, if it is used properly. The fundamentals of Forex trading include various government and private reports that show economic conditions as well as other factors that may affect the economy of a government or country. Knowing how to analyse these reports is critical to avoid losing money to the market. By being aware of economic trends and factors, and how they affect a specific economy, trading on the Forex market can be more profitable and less of a risk. Copyright 2007 Joel Teo. All rights reserved.


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