Fundamental indicators. Economic indicators are the basis of analysis. Volume indicators

A trader's true friends when making money on financial markets are indicators - specially developed analysis tools that automate the process of searching for certain repeating patterns on a chart. The use of these assistants is largely based on the ideas of technical analysis. Therefore, every novice trader should, at the beginning of his journey, learn some important points regarding what technical indicators for Forex are, what they are and how to use them correctly.

The history of the origins of technical analysis

You can often hear opinions that technical analysis is a young science. In fact, this is a serious misconception, since the roots of the technical approach go back to ancient times. For example, Joseph Vega, back on the Dutch stock exchange of the 17th century, was looking for patterns in price movements, and in Japan, rice traders developed the basics of a candlestick strategy, which today is actively used by all followers of technical analysis on Forex, in binary options, on stock exchanges, etc.

However, in the modern interpretation, the founder of technical analysis is considered to be Charles Dow, who developed in the 20s of the 20th century the theory of searching for price patterns, which formed the basis for the works of Ralph Nelson, William Hahn, Richard Wyckoff and others. Each of these luminaries contributed to the formation and development of technical analysis.

Subsequently, the works of these analysts were finalized, and by 1950, a book was written by J. Magee and Rob Edwards that embodied all the most successful developments in the field of technical analysis. It was called “Technical Analysis of Stock Market Trends.”

Subsequently, with the advent of computers and the active development of Internet trading, technical analysis simply blossomed - new types of charts, a large number of indicators, etc. appeared. Modern traders who are mastering Forex should pay attention to the book “The Complete Course of Technical Analysis” by Jack Schwaber, which presents contains over 800 pages of theoretical material and graphs with explanatory examples.

Technical indicators for finding patterns

When using technical analysis, a trader will definitely use technical indicators on Forex to implement a particular strategy. Like the figures of graphical analysis, there are a lot of such tools, but among them there are those that have already become classic, and therefore the methods embedded in them can be found in the work of other tools. Therefore, below it is worth briefly considering these basic technical analysis tools.

Determining the trend with the “Moving Average”

As the first indicator, we consider the indicator that has probably brought the most money to traders around the world. We are talking about moving averages (eng. moving average or abbreviated MA), the algorithm of which adds up prices in individual periods and divides the resulting figure by the number of such periods. Simply put, the MA finds the arithmetic average, using it to display a price smoothing line on the chart.

Here is an example of a 20 period MA on a weekly AUD/USD chart, using candle closing prices for smoothing. Thanks to this, market noise and random impulses are cut out, and the trader sees exactly where the price is most likely to move.

If the candles are above the MA line, then the trend is considered to be up and prices are likely to continue rising. If the candles are below the MA line, then this is a signal that the fall may continue.

Depending on what price values ​​are taken to construct a moving average (opening, closing, average) and what method is used to obtain average values, there are several types of Moving Average:

• Simple MA (SMA) - simple;
• Exponential MA (EMA) - exponential;
• Weighted MA (WMA) - weighted.

These designations are worth remembering, since one of the following abbreviations may be used when describing strategies. Despite the different types of moving averages, there is no particular difference between them, especially if you take them with a rather long period for a chart with a large time frame.

Here, for example, is what a 4-hour chart of EUR/USD looks like with 3 moving averages with a period of 50 added to it.

Using moving averages on a chart

Sliding sliders can be used for the following purposes:

• when determining a trend;
• when the trend changes;
• as a support/resistance level.

Below in the screenshot you can see how the moving average simultaneously showed that the trend was directed downward, and also provided good entry points along the trend when the price rolled back and approached the MA line, which acts as resistance in a downward trend.

Usually traders use not one moving average, but several. One is taken fast (with a short period), and the second slow (with a longer period).

This allows us to draw the following conclusions:

• as long as the fast MA stays above the upper one, the upward trend continues;
• if the fast MA is under the slow one, the downward trend continues;
• the intersection of moving averages is a sign of a trend change.

The main problem when using moving averages is sideways, during which trending technical indicators on Forex give many false signals.

Accumulation & Distribution (A/D)

A popular tool that compares price changes and trading volume. Effective use of this tool is permissible only on those instruments for which the real market volume is known. Therefore, you should not use it for currency pairs.

But if technical indicators on Forex are used to make money on stocks, stock indices or futures, then A/D becomes an extremely useful analysis tool.

Its purpose is to determine the current trend and predict its reversal. The indicator is displayed in a separate window, where the growth of its signal line indicates stable development of the trend. When the signal line rises far up, you should wait for a market reversal, which you can enter after a small sideways trend, where price consolidation occurs.

Average Directional Index (ADX)

This indicator is designed to show the strength of the current trend, thanks to which the trader always knows exactly whether it is worth opening new transactions in the direction of the current trend or not. ADX is displayed in a new window, where you should pay attention to its three signal lines DI+ (green), DI- (red) and ADX (blue).

If DI+ is higher than DI-, then you can buy binary options “Higher”, and if vice versa, then “Lower”. At the same time, it is worth watching the blue ADX line. If it rises, then the strength of the current trend, whatever it may be, increases.

Aroon indicator

Another very interesting technical indicator for Forex is called Aroon. It is used to determine the direction of the current trend and its strength. That is, it is similar to ADX, but uses a slightly different calculation algorithm.

The indicator constantly compares the peaks, displaying their changes in the form of two lines - blue and orange. The first of them shows how much time has passed since the price updated local maximums. The second does the same, but for minimums.

It is most effective to use the indicator to find trend change points. For example, in the screenshot below you can see that the intersection of the blue and orange lines indicated a change from a downward trend to an upward one.

MACD Oscillator

A very interesting oscillator is the MACD, which is widely used in financial markets. This indicator is equally good at giving signals in the direction of the trend and very accurately predicts reversals when divergence forms in the market.

The simplest and most effective signal will be the intersection of the indicator signal lines.

RSI Oscillator

Another very useful oscillator is the RSI, which uses a slightly different operating principle. This analysis tool analyzes excessive price deviation when quotes are no longer trading heavily, which portends fading momentum and a reversal.

Such areas are visually quite easy to identify. You just need to follow the RSI signal line, which moves in a separate window. If it rises far up, then this means that the price is overbought and it is important to open short positions, counting on a reversal and a fall in the price.

If the signal line, on the contrary, has dropped very low, then they say that the price is in the oversold area, and therefore purchases are urgent.

On Balance Volume or OBV

The OBV trend indicator uses a preliminary analysis of trading volumes to generate signals, which are compared with the direction of price movement. The principle of operation of On Balance Volume is as simple as it is effective. If prices rise, then the indicator assigns a positive value to the traded volumes, but if they fall, then, accordingly, a negative value.

The trader can only follow the OBV signal line. Its growth makes it important to buy contracts to increase prices, and its downward movement allows you to play short.

Stochastic Oscillator

The Stochastic Oscillator can easily claim to be the most widely used indicator in the world. It is similar to the already discussed RSI, since it also belongs to the subtype of oscillators that determine overbought and oversold prices.

To determine the critical price deviation, the indicator measures the strength of momentum, and the trader can trade market reversals using the intersection of signal lines in overbought/oversold areas and identifying divergences (divergences) when the price on the chart does one thing and the oscillator lines do another.

Above in the screenshot you can see that on the chart the price drew two successively lower minimums, while the signal lines drew two corresponding minimums, where the second is not lower than the first, but, on the contrary, higher. That is, there is a discrepancy between the price and the Stochastic, which is always a harbinger of a reversal.

Volume indicators

There is a separate branch in technical analysis that studies trading volumes and their impact on markets. The importance of volumetric analysis was first noticed and described by Richard Wyckoff, whose ideas became the basis of VSA. Trading techniques based on analysis rely in their judgments on the fact that a major player always leaves a mark on the market, since, due to the structure of the market, he cannot simply enter or exit a position. Therefore, a trader who monitors volumes can always notice the market maker’s attempts to take some actions on the market, after which all that remains is to simply repeat them and earn money.

However, it is extremely difficult to effectively use volumes on Forex when analyzing currency pairs, because the foreign exchange market has a decentralized structure, and therefore it is impossible to summarize statistics and determine the exact trading volume that has passed over a period of time.

However, many brokers understand how important it is to take volume data into account when trading. Therefore, they provide data about them as part of their system. For example, the large Forex broker Oanda provides such histograms showing how its clients are trading.

For example, the following screenshot shows placed limit orders (left column) and held open positions (right column). By the ratio of open buy and sell orders, as well as by identifying significant price levels where many pending orders have accumulated, you can increase the accuracy of your analysis.

In addition, actual volumes can be tracked through the futures markets. For example, active trading of currency futures contracts occurs on the Chicago Mercantile Exchange (CME), which regularly publishes trading volume data on its website.

But viewing reports there is not very convenient, so you can use web services that provide data on futures (ClusterDelta, TreadingView), or install one of the terminals for trading futures contracts: Ninja Trading, Thinkorswim, ATAS, MultiCharts, etc. By the way, on The ClusterDelta website has paid technical indicators for Forex that transmit volumes on currency futures from real trading platforms directly to the MetaTrader4 trading terminal.

It is important to understand that technical indicators for Forex are different. Therefore, it is advisable to combine them with each other so that they neutralize each other’s shortcomings. For example, you can take one indicator from the trend group to determine the trend, complement it with a tool to track the strength of the current movement and an oscillator to see where the price is entering the overbought or oversold area.

For example, you can use a combination of a moving average, ADX and, for example, Stochastic. The final choice of indicators depends on the trader himself, but you should not put instruments from the same group on the chart. In addition, you should not get too carried away with adding indicators, so as not to get such a picture where even the price itself is not visible behind the analysis tools.

Important notes on technical analysis

After studying an introductory course on technical indicators for Forex, a trader should understand the following:

1. The price contains everything you need to predict it.
2. There are patterns in the market, and they work well, since history tends to repeat itself.
3. To effectively use technical indicators on Forex, you need to control the release of important news.
4. The price always moves within one of 3 trends: upward, downward or sideways.
5. Before trading, you should always plot trend lines, price channels, and support/resistance levels on your chart.
6. Volume analysis tools cannot be used for Forex currency market instruments, since it is simply impossible to obtain them on a decentralized spot.
7. To work, you should choose a candlestick or bar chart.
8. A trader must know all the main trend reversal and continuation patterns, as they are often found on all charts.
9. The moving average is the simplest trend indicator, which is used to eliminate market noise and determine the current direction of the trend.
10. To determine the strength of the trend, as well as critical price deviations, you need to use one of the following tools: MACD, A/D, RSI, ADX, OBV, Stochastic and Aroon.

Results of consideration of technical assistants

Now knowing the main technical indicators for Forex, a trader should begin to master and use them, not forgetting common sense. You should not initially experiment on short time periods, where the accuracy of signals decreases due to the influence of market noise, and, of course, you should not clutter the chart with all the different indicators, making it impossible to track the price.

• Economic indicators
  • Gross National Product (GNP)
  • Gross Domestic Product (GDP)
  • Consumer Index
  • Investment volume index
  • Government Spending Index
  • Net trading volume index

• Industrial sector indicators
  • Industrial production index
  • Capacity utilization index
  • Industrial orders index
  • Durable goods order index
  • Inventory index
• Construction indicators
• Inflation indicators
  • Producer Price Index
  • Consumer price index
  • GNP deflator
  • GDP deflator
  • American Commodity Research Bureau Index
  • The Journal of Commerce Industrial Price Index
• Payment balances
  • Foreign trade balance
  • US-Japan Trade Balance
• Employment indicators
  • Labor Cost Index
• • Retail sales volume
  • Consumer Confidence Index
  • Car sales index
• Leading indicators
  • Personal Income Index

For fundamental analysis of the foreign exchange market, as well as any of the stock or commodity markets, data from special analytical reviews published for this purpose are used, as well as graphs and tables of numerical indicators - indicators for fundamental analysis. The latter are usually published monthly (with the exception of data on the gross national product and the employment index, which are published quarterly).

Any indicator for fundamental analysis is a pair of numbers. The first number is the indicator for the reporting period. The second number is the adjusted indicator for the month preceding the reporting period. For example, in July, economic indicators are published for June (the reporting period). In addition to them, the report includes the value of the same indicator for May. This is done because the institution responsible for collecting economic statistics receives more complete information for May by the time the June indicator is published, which is very important for traders. If, for example, the value of an economic indicator for the last month is 0.4% better than expected and the indicator for the previous month is adjusted by less than 0.4%, a trader can make a reasonable conclusion about a shift in the state of the economy.

Economic indicators are released at different times. In the US, they are usually published at 8:30 a.m. and 10:30 a.m. Eastern Time. It is important to remember that most foreign exchange information is released at 8:30 am. Therefore, the US foreign exchange market opens at 8:20 am in order to have time to study the latest data necessary for fundamental analysis.

Information on economic indicators is published in all leading newspapers such as the Wall Street Journal, Financial Times, and New York Times and business magazines such as Business Week. There is reason to believe that traders actively use electronic sources - Bridge Information Systems, Reuters or Bloomberg - to obtain both information from newspapers and from improvised sources of current information. Below we discuss individual groups of indicators for fundamental analysis in accordance with their generally accepted classification.

Economic Indicators

Gross National Product(The Gross National Product). Gross national product (GNP) characterizes the perfection of the economy as a whole. This indicator consists, on a macro scale, of the sum of consumer spending, investment, government spending and net trade. GNP is determined based on the sum of all goods and services produced by the US population, both domestically and abroad.

Gross domestic product(The Gross Domestic Product). Gross Domestic Product (GDP) is the sum of all goods and services produced in the United States by both domestic and foreign companies. The difference between GNP and GDP as it relates to the US economy is nominal. GDP indicators are more popular abroad. In the United States, GDP figures are published to make it easier to compare the economic performance of different countries.

Consumer Index(Consumption Spending). Consumption is possible both from personal and from net income. The consumer's decision to spend or save is psychological in nature. Consumer confidence is also an important indicator of the propensity of consumers with disposable income to move from saving to consuming.

Investment volume index(Investment Spending). Investment - or gross private domestic investment - consists of fixed inputs and the value of goods in warehouses.

Government Spending Index(Government Spending). The indicator of government spending is very important both in itself and in terms of its influence on other economic indicators. For example, US defense spending before 1990 played an important role in overall US employment. The subsequent reduction in military spending led to an increase in unemployment rates for a short time.

Net trading volume index(Net Trade). Net trade volume is another important component of GNP. Global internationalization and economic and political developments since 1980 have had a profound impact on the United States' ability to compete with foreign countries. The formation of the US trade deficit over the past decades has slowed down the growth of GNP. GNP depends on commodity flows and financial flows.

Industrial Sector Indicators

Industrial production index(Industrial Production). Characterizes the volume of total production of national industrial, municipal and mining enterprises. From the standpoint of fundamental analysis, this is an important economic indicator that reflects the strength of the economy and, indirectly, the strength of the domestic currency. For this reason, currency traders use this indicator as a potential signal for making trading decisions.

Capacity utilization index(Capacity Utilization). Characterizes the total volume of industrial production divided by the total production capacity. The latter refers to the maximum level of production that an enterprise can reach under normal business conditions. In principle, power utilization is not one of the indicators important for the foreign exchange market. However, there are examples when using this indicator from an economic perspective was useful for fundamental analysis. Its “normal” value for a stable economy is 81.5%. If it is 85% or more, this is evidence of “overheating” of industrial production, i.e. that the economy is close to reaching maximum capacity. High capacity utilization precedes inflation, and in the foreign exchange market raises expectations that the central bank will raise the policy rate to prevent or ease inflation.

Industrial orders index(Factory Orders). Characterizes the total volume of orders for durable goods and non-durable goods (TCH). The latter include food products, clothing, light industrial products and products intended to service durable goods. Orders for the latter are discussed separately. For foreign exchange market traders, the industrial orders index is of limited value.

Durable goods order index(Durable Goods Orders). The index of orders for durable goods (DDP) characterizes the output of products with a service life of more than three years. Examples of such products include automobiles, stationary equipment, furniture, jewelry, and toys. These goods are divided into four main categories: products of metallurgy, mechanical engineering, electrical engineering and transport engineering. To exclude the influence of volatility inherent in the volume of military orders, when determining this indicator, defense products are taken into account separately. This indicator is quite important for the foreign exchange market as it gives a good indication of consumer confidence. Since TDPs are more expensive than TCPs, a high indicator value reflects consumer spending intentions. Therefore, for the foreign exchange market this indicator value is bullish.

Inventory index(Business Inventories). Based on the value of items produced and stored in warehouses for later sale. This information is not difficult to gather and is not something that can be used to shock the market. In addition, the achieved level of financial management and general computerization provide a high degree of control over warehouse goods. Therefore, the importance of this indicator for the foreign exchange market is limited.

Construction Data

These numbers are an important economic indicator included in the calculation of US GDP. Above all, construction has traditionally been the engine that pulled the American economy out of recessions after World War II. This indicator is divided into three main categories:

1. number of permits for new construction and number of zero cycles
2. number of sales of new and existing single-family homes
3. construction costs.

The construction indicator is subject to cyclical changes and is very sensitive to the level of net income. It should be noted that a low discount rate in itself is not able to lead to high demand for houses. As the situation in the early 90s showed, despite the traditionally low mortgage interest rates in the United States, due to distrust in the weak economy, home construction increased only slightly. At the same time, despite the recession of 2000-2001, the cost of houses, for example in California, also practically did not decrease.

Construction volumes in the range of one and a half to two million units reflect a strong economy, while a figure of approximately one million units indicates an economic downturn.

Inflation Indicators

Traders are closely monitoring the development of inflation, since the main method of combating it is to increase interest rates, and higher rates are aimed at supporting the domestic currency. Traders use the following economic tools to measure inflation.

Producer Price Index(Producer price index). The Producer Price Index (PPI) is compiled from most economic sectors such as engineering, mining and agriculture. The index set contains approximately 3,400 products. The share of each of the most significant groups of goods when calculating this index: food products - 24%; fuel - 7%; cars - 7%; clothing-6%. Unlike the Consumer Price Index, the PPI does not include imported goods, services, or taxes.

Consumer price index(Consumer price index). The Consumer Price Index (CPI) reflects the average change in retail prices for a fixed basket of goods and services. CPI indicators are compiled from a set of prices for food, housing, clothing, fuel, transport and medical services purchased and received by the population every day. The share of each of the most significant groups of goods when calculating this index: housing – 38%; food products - 19%; fuel - 8%; cars - 7%; clothing-6%.

Both PPI and CPI indices are used by traders as aids in gauging inflation activity, although the Federal Reserve believes these indices overestimate the strength of inflation.

GNP deflator(Gross national product implicit deflator). It is calculated by dividing the current value of GNP by some constant value of GNP in US dollars.

GDP deflator(Gross domestic product implicit deflator). It is calculated by dividing the current GDP value by some constant GDP value in US dollars. Both deflators are published quarterly, along with the corresponding GNP and GDP figures. Deflators are considered to be the most significant measures of inflation.

American Commodity Futures Research Bureau Index(Commodity research bureau's futures index). The index of the American Commodity Futures Research Bureau (IBTF) makes it easier to monitor inflation trends. The IBTF consists of 21 commodities with the same specific weight. The components of the IBTF are:

• Precious metals: gold, silver, platinum
• Industrial crude oil, heating oil, unleaded gasoline, lumber, copper and cotton
• Grains: wheat, rye, soybeans, soybeans, soybean oil
• Livestock and meat: cattle, pigs and sows
• Import: coffee, cocoa, sugar
• Miscellaneous: orange juice, etc.

The characteristics of food products make the IBTF less reliable in conditions of general inflation. However, this index is quite popular and has proven its reliability since the late 80s.

Industrial Price Index of The Journal of Commerce. Consists of the prices of 18 industrial materials and raw materials used in the initial stages of mechanical engineering, construction and energy production. It is more sensitive than other indices because it was designed to generate signals about changes in inflationary processes, ahead of other indices.

Balance of Payments

Foreign trade balance(Merchandise trade balance). This indicator is one of the most important economic indicators. Its value is used to judge the onset of long-term changes in financial and foreign policy. The trade balance consists of the net difference between exports and imports when trading with a particular country. The index data includes products in 6 categories:

• food
• raw materials and industrial components
• consumer goods
• cars
• stationary equipment and
• other goods

A separate indicator of the Balance of Payments group is the US-Japan Trade Balance.

Employment Indicators

Employment level is an economic factor that plays an important role in many ways. Naturally, the state of the economy is judged by the level of employment (see Fig. 3.1). The employment rate is a fundamental indicator. This is an important characteristic to keep in mind, especially during times of economic downturn. When the public thinks about the health and recovery of the labor sector, the employment index is the last thing to reassure them. When a downturn in the economy causes job losses, it takes some time for the population to develop psychological confidence in the economic recovery until new jobs appear. At the individual level, understanding the improvement in the employment situation can be difficult due to the fact that jobs are initially created only in small companies and in small numbers, a circumstance that makes the expectations associated with the index not entirely justified. Employment reports are important for financial markets in general and foreign exchange markets in particular. Employment data is especially relevant as the economy transitions from recession to gradual recovery. The importance of this indicator in extreme economic situations is due to the fact that it creates an overall picture of the state of the economy and the duration of the business cycle. A decrease in the unemployment rate indicates the end of the cycle, while at the beginning this figure is the highest.

Rice. 3.1. Example graph of unemployment rate in the USA

It should be noted that the most commonly used is the so-called unemployment figure, which does not represent the unemployment rate for a given month as a percentage, but the nonfirm payroll rate. This coefficient is calculated as the quotient of dividing the difference between the total number of able-bodied people and the number of workers by the total number of able-bodied people. This indicator is more complex and carries more information. In the foreign exchange market, the standard indicator that traders monitor is the unemployment rate, which reflects industrial employment, wages, average earnings and the average length of the working week. In principle, the most important employment characteristics are industrial employment and the employment rate, followed by the percentage unemployment rate.

Labor Cost Index(Employment Cost Index). The labor cost index (LCI) reflects the comparison of earnings with the level of inflation and allows for the most complete analysis of the completeness of remuneration, including salaries, real payments and additional benefits. PIPI is one of the main quarterly statistics of the Federal Reserve System.

Consumer spending indicators(Consumer Spending Indicators). Based on retail trade volume data, they are important to the foreign exchange market as they indicate the strength of consumer demand and consumer confidence, which are inputs into calculations of other economic indicators such as GNP and GDP.

Retail volume(Retail Sales). Retail trade volume data shows traders both the strength of consumer demand and the level of consumer confidence. This indicator plays a particularly important role in the United States, where the subject of the economy is the individual consumer. Consumer behavior is a major driver of the American economy. The most important months for Forex traders in terms of retail trading performance are December (the month of preparation for the Christmas and New Year holidays) and September (the month of resumption of school). November is gradually becoming increasingly important in this sense, since recently the retail chain has switched from post-Christmas to pre-Christmas sales.

Consumer Confidence Index(Consumer Sentiment). The consumer confidence index directly reflects the willingness of consumers to increase or maintain at the same level all expenses associated with meeting the current needs of the family, and, indirectly, the situation in the labor market.

Car sales index(Auto sales). Despite the importance of the automobile industry in terms of both production and sales, the level of automobile sales is not one of the economic indicators relevant to currency traders. The US automobile market is experiencing a long and steady decline in its market share, which only became less painful in the early 90s. The automobile market has recently undergone significant internationalization, with American cars being assembled outside the United States, and Japanese and German cars being assembled in the United States. Due to its mixed nature, using the car sales index in the foreign exchange market is difficult.

Leading Indicators

Leading indicators include:

• average working week in mechanical engineering;
• weekly average number of unemployment claims;
• volume of new orders for consumer goods and materials (adjusted for inflation);
• trade claims (companies experiencing supply disruptions from suppliers);
• volume of contracts and orders for stationary plant equipment (taking into account inflation);
• number of building permits issued;
• changes in the backlog of durable goods manufacturers' orders;
• changes in prices for perishable goods.

Personal Income Index(Personal Income). Reflects the income level of individuals, non-profit organizations and private trust funds. Components of this indicator include wages and salaries, rental income, dividends, interest on deposits, and transfer payments (social security benefits, unemployment benefits, veterans' pensions). Salaries and earnings reflect the real economic situation. This indicator is relevant for the foreign exchange market. In the absence of adequate personal income and the inclination to purchase, the volume of durable and non-durable goods purchased by the consumer is limited. For Forex traders, the personal income index is not significant.

For fundamental analysis of the foreign exchange market, as well as any of the stock or
commodity markets use data published for this purpose from special
analytical reviews, as well as graphs and tables of numerical indicators
for fundamental analysis. The latter are usually published monthly (with the exception of data on the gross national product and the employment index, published
quarterly).
Any indicator for fundamental analysis is a pair of numbers.
The first number is the indicator for the reporting period. The second number is the refined
indicator for the month preceding the reporting period. For example, in July
economic indicators are published for June (reporting period). In addition to them in the report
include the value of the same indicator for May. This is done for the reason that
the institution responsible for collecting economic statistics receives by the time
publication of the indicator for June, more complete information for May, which is very important
for traders. If, for example, the value of an economic indicator for the last month
0.4% better than expected and the figure for the previous month was adjusted less
than 0.4%, a trader can make a reasonable conclusion about a shift in the state of the economy.
Economic indicators are released at different times. In the USA they
usually published at 8:30 a.m. and 10:30 a.m. Eastern Time. Important
Remember that most information about foreign exchange is released at 8:30 am.
Therefore, the US foreign exchange market opens at 8:20 am in order to have time for
studying the latest data necessary for fundamental analysis.
Information on economic indicators is published in all leading newspapers,
such as the Wall Street Journal, Financial Times, and New York Times and business magazines,
such as Business Week. There is reason to believe that traders are actively using electronic
sources - Bridge Information Systems, Reuters or Bloomberg - to get how
information from newspapers and from available sources of current information.
Below we discuss individual groups of indicators for fundamental analysis
in accordance with their generally accepted classification.

Economic Indicators

The Gross National Product . Gross
national product (GNP) characterizes the perfection of the economy as a whole. This
the indicator consists, on a macro scale, of the sum of consumer spending, investment,
government spending and net trade. When determining GNP, we proceed from
the sum of all goods and services produced by the US population both domestically and internationally
border.

The Gross Domestic Product.

Gross domestic
product (GDP) is the sum of all goods and services produced in the United States as
domestic and foreign companies. The difference between GNP and GDP is that
concerns the US economy, is nominal. GDP indicators abroad are more than
popular. In the US, GDP figures are published to facilitate comparison.
economic indicators of different countries.

Consumption Spending.

Consumption is possible as for
personal account and from net income. The consumer's decision to spend or
maintaining them is psychological in nature. Consumer Confidence
- this is also an important indicator of the propensity of consumers with disposable income to
move from saving money to consumption.

Investment Spending Index.

Investment—or gross
private domestic investments—consist of fixed investments and the cost of goods at
warehouses

Government Spending Index.

Index government spending is very important both in itself and in terms of its impact on
other economic indicators. For example, US defense spending before 1990 played
important role in overall employment in the United States. The subsequent reduction in military spending led to an increase in the figures for a short time
unemployment.

Net Trade Volume Index.

Net trading volume isanother important component of GNP. Global internationalization and
economic and political events since 1980 have had a strong impact on
the ability of the United States to withstand competition with foreign countries. Education for
In recent decades, the US trade deficit has slowed GNP growth. GNP depends on
commodity flows and from financial flows.

Industrial Sector Indicators

Industrial Production Index. Characterizes
volume of total production of national industrial, municipal and
mining enterprises. From the standpoint of fundamental analysis, this is important
economic indicator reflecting the strength of the economy and, indirectly, the strength of the domestic
currencies. For this reason, currency traders use this indicator as a
potential signal for making trading decisions.

Capacity Utilization Index.

Characterizes the total volume of industrial production related to the total
production capacity. By the latter we mean the maximum level
production that an enterprise can achieve under normal business conditions. IN
In principle, the use of power is not among the indicators important for the foreign exchange market
applies. However, there are examples when using this indicator from the standpoint
economics was useful for fundamental analysis. Its "normal" value for
stable economy is 81.5%. If it is 85% or more, it is evidence
“overheating” of industrial production, i.e. that the economy is close to achieving
maximum power. A high degree of power utilization precedes inflation, and
the foreign exchange market raises expectations that the central bank will raise the discount rate,
to prevent or reduce inflation.

Factory Orders Index.

Characterizes the total volumeorders for durable goods and non-durable goods (TCH). TO
the latter include food products, clothing, light goods
industry and products intended for servicing durable goods
use. Orders for the latter are discussed separately. For foreign exchange market traders
with industrial orders is of limited significance.
Index of orders for durable goods (Durable Goods Orders). Index of orders for durable goods (TDP) characterizes production output
with a service life of more than three years. Examples of such products are cars,
stationary equipment, furniture, jewelry and toys. These products are divided into
four main categories: products of metallurgy, mechanical engineering, electrical and
transport engineering. To eliminate the impact of volatility inherent in volume
military orders, when determining this indicator, defense products are taken into account separately.
This indicator is quite important for the foreign exchange market, since it gives a good
perception of consumer confidence. Since TDP are more expensive than TCP, high
the indicator value reflects consumers' spending intentions. Therefore for
Forex market, this indicator value is bullish.
Inventory index (Business Inventories). Based on the cost of the items,
produced and stored in warehouses for subsequent sale. Collect one
information is not difficult and is not something to hit the market with. Besides,
the achieved level of financial management and universal computerization ensure
high degree of control over warehouse goods. Therefore, the importance of this indicator for
The foreign exchange market is limited.

Elliott, candlestick analysis allows you to understand what is happening in the market due to candlestick patterns. Fundamental analysis pays attention to news, considering it to be the main driving force of the market.

Very often you can come across the opinion that using the foundation = trading on the news. This is absolutely wrong; the very concept of fundamental analysis includes trading on news as one of the options (this is how they work in the short term). But you can also use this data if you trade in the medium and long term. So “foundation” is a broad concept and is not limited to catching impulses from unexpected news.

Strengths and weaknesses of fundamental analysis

As for the benefits of fundamental analysis, I would highlight the opportunity to better understand the processes taking place in the world of finance. At least when you compare the events that have already occurred with the news background, it becomes clear what exactly could have caused the unexpected movements. You don’t need to look far for examples; just remember the recent BRexit and the behavior of the pound/dollar pair.

Of course, such cataclysms (with a predictable outcome) happen rarely; the last one comparable in scale comes to mind only on election day in the UK. Then the pound also started to heat up and those who opened short positions on time were in seventh heaven. By the way, the NEURO BOT 11 advisor earned more than 3000% profit per day on this movement!

As for the weaknesses, I would include the inability to make an accurate forecast. Below we will look at exactly how important data should be taken into account in trading, but by and large it all comes down to the fact that we compare real data with what experts expected to see. With strong deviations, sharp price movements are possible (this is important for short-term trading); also, based on macroeconomic statistics, one can generally judge the situation in a particular country, which allows one to rise a little above the situation and see what is happening from a new angle.

But don't count on the fundamentals to give you precise market entry/exit levels. At best, as a result of the analysis, you can only understand which direction of price movement is preferable (if we are talking about medium- or long-term analysis).

Another disadvantage is that in most cases, price movements can only be explained by fundamental data after a certain period of time. And this already smacks of adjusting known results (price movement) to the starting conditions (macroeconomic statistics). That’s why the forecasts of various analysts look so good because they already have the price movement, the published data, and they just need to beautifully describe what exactly served as the catalyst for the movement.

There are also time restrictions, for example, before the release of any news, a trader cannot trade because he simply does not have a basis from which to build on.

Typically, fundamental analysis is used as a complement to any other trading tactic. For example, you use technical analysis to identify important levels, support/resistance zones, etc. And you use fundamental analysis simply to determine the direction of price movement.

Where to get information for fundamental analysis?

All of the above, I think, made you think, where exactly can and should you get information? If you try to get it from magazines, newspapers, news, etc., you will quickly fall into depression - even the most modern supercomputer, much less the human brain, cannot process so much data.

Fortunately, there is a solution to this issue; DCs help their clients with this and post an economic calendar on their official websites, which marks all the important events for every day. You don't need to sift through hundreds of sites trying to find the data you need - everything is in the calendar.

The minimum required information is displayed:

Title of the news;

Its previous, forecast and real value;

Brief description of the news itself.

It’s very convenient that the news is immediately ranked depending on its importance:

An empty circle is absolutely useless news for us;

Green - has an extremely low impact on price movement;

2 yellow circles - you can already take it into account, but such news must be taken into account, as they say in the aggregate, usually there are a lot of them, and by itself it cannot have a strong impact on price behavior;

3 red circles - the most important news. It may happen that one such news will turn everything upside down.

At the same time, you should not think that any news becomes a catalyst for price movement. Quite the contrary - most often, after the release of important statistics, there is no particularly violent reaction on the market. The opposite picture develops in situations where the expectations of experts differ greatly from the actual state of affairs. Imagine, experts were expecting a decrease in the unemployment rate, but instead they received an increase in the number of applications for assistance by 50 thousand per week. This is a very serious data discrepancy that will most likely cause a sharp price movement.

In principle, the news can be found in the trading terminal itself. To do this, you need to go to the news tab and select the one you need from the list. Some of them are in English, and in general, working with them is much less convenient than with the economic calendar. But news in MT4 should not replace it; there is much more of it in the terminal, and besides, you can familiarize yourself with the analytics of specialists.

How to work during news releases?

You can work with news in several different ways, do it manually or using auxiliary indicators. We will look at all possible methods and a couple of trading strategies.

Catching the news impulse

The simplest of all possible strategies. Our task is to wait for the release of important news and catch the impulse movement, if, of course, there is one at all. For 7-9 years it was a pleasure to trade like this, but now the price often shoots up in both directions, demolishing most of the cunning traders and then moves on as if nothing had happened.

Please note that initially (before the news is released) we do not know where exactly the price will go, we do not even know whether there will be a significant price movement, we only hope so. In this case, the impulse can be caught in 2 ways:

Entering at the market price. This method is not suitable for short-term trading on news, the fact is that during a sharp movement, the count is literally seconds, so you simply may not have time to conclude a deal, and no one has canceled slippage.

Bollinger Bands strategy + news

One of the simplest, to determine the moment the price exits the horizontal corridor, only 2 indicators will be used - Bollinger Bands with an offset of 2.5 and 1.0. Trading will be conducted on the m5 time interval.

We do not close the deal as long as the price is in the range between the BB lines with deviations of 1.0 and 2.5.

It can be seen that with the proposed method of position tracking, the exit point turned out to be slightly more profitable than with a fixed TP. Due to this, we received an additional 10-15 points of profit. In some situations, it is possible to take several times more than with a fixed TR.

Taking into account the psychology of news trading

Probably, more than once you have encountered the fact that the price literally goes a couple of points beyond the stop you set, knocks it down, turns around and calmly moves in the right direction. This phenomenon can also be used in trading; we are talking about knowing where exactly the majority of traders place stops and pending orders to enter the market. Market makers are guided by this, accumulations of orders are their main goal, I propose to be somewhat smarter than the bulk of merging traders and trade wisely.

In principle, the approach itself remains the same - we place pending orders, but we do it at levels passing through significant extremes that formed from the beginning of the day until the release of important news. We place them in anticipation of the price rebounding from them, that is, Sell limit orders for highs and Buy Limit orders for lows.

Example 2 – a more successful entry into the news.

Monday, October 17, the only news of the first magnitude is the data on the EU consumer price index and the evening speech of Draghi (the head of the European regulator). We proceed according to the same scheme:

From the beginning of Monday, we select the required highs/lows and draw levels through them, taking into account the minimum distance between them. Be sure to set a stop of 20-30 points for each;

After the news comes out, we monitor the market reaction. Since there was no sharp impulse (the real data coincided with the forecast values), we are simply waiting for events to develop;

The price touches the buy order and, with a TR of 30-35 points, allows you to close the deal with a profit;

After this, two sell limits are triggered. As a result, by the end of the day, one of them would have been with a profit of about 7-10 points, the second - with a loss of 5-6 points. We would have to close them forcibly.

On the same day there was another important news - Draghi's speech, but it also did not have a strong impact on the price behavior. If after his report the price began to move sharply, we would have to close all transactions manually with any result.

How to make it easier to work with news

We have already found out that you need to take news into account in your work even if you are working on a fully indicator trading strategy. Despite the fact that all the data is presented on the broker’s website in the most convenient form for the trader, it is still quite inconvenient to constantly switch between the browser and the terminal, and you can simply forget about the release time of important news.

To fix this, you need to go to Tools - Settings - Advisors, check the “Allow Web requests” checkbox and enter the address of the desired site. Recently there have been problems with the indicator, you need to contact the developers.

SharkFX calendar – for those who don’t like to clutter up their schedule

Otherwise, the set of possibilities is the same - you can filter the news you need, set the way to indicate the “weight” of the news, enable/disable a sound alert that will warn you about the news a couple of minutes before it comes out. So the only difference is that the schedule is not cluttered.

Conclusion: fundamental analysis and news trading

More free lessons on our you tube channel -

Even if you disdain fundamental analysis, you are unlikely to argue that sometimes news simply turns the market situation upside down. This means that it is imperative to use them in trading.

I’m not saying that you have to sit at the monitor and trade only after this or that news comes out, not at all. But you simply must at least tighten your stops before its release or correctly place pending orders the day before.

And remember - the market does not always react predictably to important news, so do not think that this style of trading is too simple. For profitable trading, it will be quite enough if you simply do not forget about the release time of important statistics.

Fundamental analysis in Forex seems simple only at first glance. For many novice traders, it seems like the grail. It seems logical, for example, that the release of positive statistics on the US labor market should push the dollar up. Why not? This suggests that the economy is growing, which means the price of the American currency is also growing.

When the market turns down, it discourages anyone from delving into trading. “The broker draws the price, all this trading is a scam” - this is what novice traders think, trapped in their own inexperience. And the following could happen:

• the statistical data were obvious and by the time of publication they were already included in the price. And any other factor could lead to a price drop;
• investors expected much stronger results and were disappointed;
• another fundamental factor turned out to be stronger.

Despite the fact that it is not recommended to trade with intraday strategies at the time of news release, we will still risk offering you a strategy that combines Forex fundamental analysis and technical analysis.

Fundamental analysis on Forex and “Bulls & Bears”

This strategy uses two indicators - oscillators. They allow you to catch a correction after a strong price surge. After the release of reports, the trend immediately enters the volatility stage. After the main trend is caught, the price appears to have correction areas and inertia. Auxiliary indicator - Bollinger Bands.

Trading conditions:

• Timeframe - 15 minutes.
• Currency pairs - any, depending on what news (reporting) is published.
• Bulls settings: Period = 13, Levels 0.004 and -0.004.
• Bears settings: Period = 13, Levels 0.004 and -0.004.
• BB indicator settings: Period = 40, Shift = 0, Deviation = 2, Apply = Close.

Conditions for opening positions:

• We trade only on the most important news (the economic calendar will help).
• One of the oscillators drew a pattern: on the first candle there is a relatively large column in absolute value (compared to the previous one). The next column is the same in modulus, but in the opposite direction.

The trade is opened on the next candle in the direction opposite the news candle. If it falls, we open a long position; if it rises, we open a short position. We close the deal when the correction candle reaches the middle of the news candle. An example of opening a long position on the screen: