The main economic reading how good is one economy come by the fundamental factors. On the forex markets, the fundamental factors are the most important measurement for analyzing the market and making how short such and long time forecasts are. There is a big serial of fundamental factors as watching all data and all indicators the traders could confuse totally.
This lesson describes the secret of how to read the fundamental factors and how to use the news even before it comes.
The USA is the biggest economy and the fundamental factors of the locomotive of the world economy are very important. The news by the USA has a big influence over the markets around the world. Therefore the first key for success is: Do not miss the economic data by the USA!
But many traders are much more confusing watching the fundamental data and realize big losses by that. The most important for the economic data is to be fast. You have to think much more than to all rest. As the forex market is the market where the news come first even faster than CNN you have to be with the news to be a successive trader.
The key for the trading is to have a look ahead over the expecting events. The expecting events and the expecting data is one of the main factors moving the markets. Watching the events at least 48 hours ahead even one week ahead is a good period.
Make your plan for the expecting events, and the following statistics. See in details the last data for some events and the forecasting data for this event. Spot all events where the expecting data is different by last month. How the difference is bigger such bigger movement is possible to expect on the market. If to some event ahead have other events first watching the closer events, but combine the closer events with the events further ahead. Find this event that shows much more for the economy and is an important economic event.
Later we will stop your attention to these events that have a big influence on the markets. One of the most important analyzing the expecting events and the movements in the forex market is the changes in the expecting forecast. During the last 24 hours when the event news will come, the forecast could change too much by the first expectations. You have to find how the expecting forecast change in what directions.
Even little changes make big movements because the traders find starting trends in these events and make speculations to extend the movements on the market and the profits. For these economic analyses and forecasts, you can find on many web site in sectors' economic calendar. But few are the main organizations making such investigations to give forecasts about the level of the expecting economic events. And these are Briefing, Bloomberg, Dealers votes some banks and others.
When the event stays known then is the second period of the trading. The volumes on the market stay 3-5 times more than normal for a short time. For about 4-6 minutes the market has very big volumes and the movement is serious. Then is better to use at least 35 pips to stop losses for trading due to the big movements in both directions.
How the expectations of the traders if in the last days even hours before the event data to stay know are moving like a trend, when the data come with the same as expecting value then the market back to the last positions a few hours ago.
For example if is expecting better data for the US economy and finally this data is the same as expecting we will see not rising the US dollar and losing a dollar. This is the most important moment when the traders make the big losses.
And next the last moment when the data is over and is broadly announce and is reached to all traders, then the market start to work in a new different way. The news is analyzing how such economic data just is mean, whether the economy is on the right way or not.
At least ten minutes after the event then start the trend on the market affected by the news. This is the real trend and in the first 5-10 minutes there is no clear trend in most cases. In the first couple of minutes, the traders try to make the big movements and to extend the profits.
Only in cases when the realizing news is meaning then the forex movement is in one direction. For example the expecting Unemployment is 6.0% and the data come as 6.2% it means that with sure the market will move against the dollar.
The next case on the market is when after the data comes, have to come new data for another sector. In this case, the market waits and does not move so much to make the movement in trend. The traders prefer to wait to see and next data before opening positions and to catch up with the starting trend.
There are many economic indicators analyzing and giving the condition of the economy. Some of the indicators are not so important, others are very important. In the next lesson we will analyze the most important economic indicators.
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