It also reports their " capacity utilization ," the degree to which each factory's capacity is being used. It is ideal for a nation to see a production increase while being at its maximum or near-maximum capacity utilization.

Traders using this indicator are usually concerned with utility production, which can be extremely volatile since the utility industry, and in turn, the trading of and demand for energy is heavily affected by changes in weather.

Significant revisions between reports can be caused by weather changes, which in turn can cause volatility in the nation's currency.

The CPI measures change in the prices of consumer goods across over different categories. This report, when compared to a nation's exports, can be used to see if a country is making or losing money on its products and services. Be careful, however, to monitor the exports — it is a popular focus with many traders because the prices of exports often change relative to a currency's strength or weakness. Other major indicators include the purchasing managers index PMI , producer price index PPI , durable goods report, employment cost index ECI and housing starts.

And don't forget the many privately issued reports, the most famous of which is the Michigan Consumer Confidence Survey. All of these provide a valuable resource to traders if used properly. Since economic indicators gauge a country's economic state, changes in the conditions reported will therefore directly affect the price and volume of a country's currency.

It is important to keep in mind, however, that the indicators discussed above are not the only things that affect a currency's price. Third-party reports, technical factors, and many other things also can drastically affect a currency's valuation.

When conducting fundamental analysis in the forex market :. There are many economic indicators, and even more private reports, that can be used to evaluate forex fundamentals. It's important to take the time to not only look at the numbers but also understand what they mean and how they affect a nation's economy.

When properly used, these indicators can be an invaluable resource for any currency trader. Company News Markets News Cryptocurrency News Personal Finance News Economic News Government News. Your Money. Personal Finance. Your Practice. Popular Courses. Compare Accounts. These include unemployment numbers, housing statistics, and more.

GDP tells you the total market value of all the goods and services a nation produced that year. While many see GDP as the broadest way to view an economy, it is also a lagging indicator, because it is only released once a year and thus does not give a snapshot of where an economy is in the current moment.

Before the final annual GDP is released, there are two reports: the advance report and the preliminary report. The reports are likely to stir up some volatility in the market, especially as they often offer different numbers. The industrial production report specifically shares changes in production of factories, utilities, and mines.

Utility production can be more volatile as it is impacted by weather and other factors. For example, after news about huge floods that devastated farms in China in November dropped, we saw a spike in the value of the USD over the CNH. The retail sales report, as the name suggests, measures total sales from all retail stores in the country.

This is an excellent way to track consumer spending, and reports adjust for impacts of the seasons. Retail sales reports are often more readily available with more recent data, so they are useful between releases of the GDP and other lagging indicators. The CPI will give you price changes of all consumer goods at a glance. Export prices can change pretty rapidly, so you need to keep a good eye on them. Every nation has a Central Bank. These institutions oversee monetary policy, set economic goals such as lowering inflation or raising employment levels, issue currency, regulate credit, manage reserves, and act as the bank of the government.

Speaking of central banks, interest rates can make a huge difference in exchange rates for currencies. Higher interest rates indicate optimism from the central bank, as they mean the economy is growing. If interest rates are being cut, that means the central bank is more skeptical. Traders will often try to anticipate what a central bank is going to do. If there is news approaching of an announcement and traders think that interest rates will increase, they might start buying that currency to get a head start on the increase in value associated with these higher rates.

Others will take you by surprise, such as major weather events, or… a global pandemic? National economies have been impacted not only by the start of the pandemic back in March , but also news of developing vaccines, vaccine rollouts, the Delta variant, and more. Traders flocked to the Yen and Swiss Franc after news of a potential COVID variant resistant to vaccines, as these safe haven currencies often stand up more strongly to political turmoil.

Fundamental analysis helps you understand the building blocks of a currency and help you anticipate where it will go next. However, many traders use the forex markets more for short-term price fluctuations. This means that immediate news and technical analysis are often more helpful. Long-term positions are more common in the stock market than in forex, and fundamental analysis is a bit more useful for deciding what to do with your long-term positions.

However, fundamental analysis can give you a heads up on when a currency might be experiencing short-term volatility that you want to capitalize on. Reading an economic calendar and tracking upcoming reports will help you predict these windows and sneak on in to capitalize on a turbulent market. But how do you start putting this into practice? First, make sure you have one of the top brokers for forex trading , which will automatically set you up with many of the tools you need.

In particular, the following advice can get you started on tracking economic indicators and making better-informed trading decisions. Keeping an economic calendar handy on your desktop can help keep you informed of upcoming reports and indicators. There are many economic calendars available from a variety of websites. One of the most important differences between stock and Forex trading relates to the trading hours of the markets.

Forex is an OTC over-the-counter market, which means that currencies can be traded around the clock during Forex trading sessions. The main trading sessions in the Forex market include the New York session, the London session, the Tokyo session, and the Sydney session. The Forex market is closed only during weekends, but the difference in time zones between the mentioned trading sessions makes it possible to trade currencies even in the midnight hours should you choose.

The stock market, on the other hand, sticks to the open market hours of a stock exchange. Most stock exchanges are open from 8am to 5pm local time, making it impossible to trade stocks outside these hours.

When a trading opportunity on the stock market occurs after the market closes, you need to wait for the stock market to open the next morning to place your trade. This is the first point for Forex in our trading equities vs Forex battle. Next on the list of major differences between Forex and stocks is the number of tradeable instruments. There are only eight major currencies on Forex: the US dollar, the euro, the British pound, the Swiss franc, the Japanese yen, the Canadian dollar, the Australian dollar, and the New Zealand dollar.

Even if we expand this list to cover all G10 currencies, including the Norwegian and Swedish krona, there are still significantly fewer currencies on the Forex market compared to the stock market. This means traders can focus on a few currencies instead of hundreds of stocks. The New York Stock Exchange alone has around 2, stocks listed. The growing competition between Forex brokers has reduced transaction costs to record lows. Major currencies, like the one listed above, are usually very tight spreads in the range of pips the fourth decimal place of an exchange rate , while less liquid pairs and exotic currencies can have significantly higher spreads.

With most brokers, there are no commission fees involved in Forex trading. The stock market, on the other hand, has substantially higher transaction costs compared to Forex. Brokers usually charge a fixed commission to open a trade. Still, a stock day trader vs Forex trader could pay way more in transaction costs. If you have been following the stock market in recent years, you might have noticed insider trading making headlines in the news. Although this practice is forbidden, the large number of listed companies makes insider trading possible.

Bozhidar Plamenov Bozhidarov. Stephen Hoad. Several factors prove helpful in building long-term strength or weakness of the major currencies and will have a direct impact on you as a forex trader. Countries with strong economic growth will surely attract foreign investors and thereby strong currency value.

If the economic growth and outlook is positive, it indicates there is low unemployment rate, which in turn means higher wages to the people. Higher wages means people have more spending power, which in turn indicates higher consumption of goods and services. Thereby, this propels the economic growth of the country and there is an increase in the currency prices. Inversely, if the economic growth and outlook of a country is weak, it indicates the unemployment rate is high.

This shows that the consumers do not have the spending power; there are not too many business setups. The government central bank is the only entity that is spending. This leads to a decrease in the currency price. Therefore, the positive and negative economic outlook will have direct impact on the currency markets. All thanks to globalization and technological advances which have kind of provided wings to the market participant to invest or spend virtually anywhere in the world.

Capital flows means the amount of capital or money flowing in or out of a country or economy because of capital investment via purchasing or selling. We can check how many foreign investors have invested in our country by looking at the capital flow balance, which can be positive or negative. When a country has positive capital flow balance, it indicates more people have invested in the country than investments heading out of the country.

While a negative capital flow balance indicates investments leaving the country is much more than investment coming in. A higher capital flow means more foreign buyers have invested, which in turn increases the currency prices as investors want to buy your currency and sell their own.

Consider an example of USDINR currency pair - if on one particular month, capital flow is very large, directly it indicates that more foreign buyers are keen on investing in our home country. For this, they need local currency. Therefore, the demand of INR will increase and the supply of foreign currency USD or Euro will increase. The decrease in the price of USDINR depends on what the overall capital balance is.

In simple terms, if the supply is high sellers are more for a currency or demand is weak , the currency tends to lose value buyer are less. The Export and Import of goods from one country to another is a continuous process. There are exporting countries, which sell their own goods to other countries importing countries that are keen on buying the goods. Simultaneously, the exporting country becomes an importing country when it in turn buys something from another country.

The buying and selling of goods is accompanied by the exchange of currencies, which in turn changes the flow of currency, depending on how much we export value and import value. If the export bills of a country are higher than our import bills, we have trade surplus and the trade balance is positive.

If the import bills of a country are higher than our export bills, we have trade deficit situation, and the trade balance is negative. Positive trade balance trade surplus comes with the prospects of pushing the currency price up compared to other currencies. Foreign investors prefer to invest in countries where the government is stable, having stable laws for business. Any impact to an economy positive or negative will directly affect the exchange rates. Home Coding Ground Jobs Whiteboard Tools Business.

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Considering that the forex market is open 24 hours a day, five days a week, traders may find this more flexible than trading the stock market as it is only open for 8 hours a day. Meet Shane. Technical analysis is applicable to both the stock and forex market as well as other markets , however, it is primarily used by forex traders. Capital flows means the amount of capital or money flowing in or out of a country or economy because of capital investment via purchasing or selling. Indeed, the vagaries of the markets — both for stocks and currencies — means you could easily lose money too.

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