Economic Indicators Course for Traders

all right so this is a very popular economic calendar that a lot of traders use so when you go to forex factory.com click on this tab blender tab pay attention to a couple of things first thing first make sure you set the time correctly click on this so that it is in sync with the time that you want all right and also take note of the currency column you need to pay attention to the currencies in which you are trading and also consists of related to the currency that you're trading okay and look at the impact column generally as a start we are going to look at the red color ones red color means high impact event orange color medium impact events yellow color low impact event gray color no impact okay also look at these three columns previous forecast actual previous refers to the previous data that's been released forecast is the economist consensus okay the estimates and actual is the number that is released right now so if it is above expectations above forecast it will be green color if it is below forecast it will be red color and normally for most of the economic indicators if it is better than expected it is generally good for the currency but if it is worse than expected then it is bad for the currency and this is not for every economy event because there are some numbers which comes out if it is worse than expected it is actually good for the currency so if you don't want to pay attention to the low impact events or the no impact events you can go to the filter button over here then you can check the boxes that you want to see right these are the high impact medium pack low impact no impact the currencies which you are focusing on you can remove those that you don't want to see and one very common mistake that a lot of retail traders make is that they can look at the economic calendar but they don't know what do all these economic indicators mean when you look at the data for example ism services do you know what it means a lot of retail traders don't know what it means and hence that is why they lose money so let's go to the whiteboard so that i can explain what do all the important economic events mean so we're gonna talk into detail about economic indicators which a lot of retail traders don't care that's why they lose money economic indicators also tell you what's going to happen in the stock market in the bond markets basically whether you like economics or not you need to learn this so central banks what they do is that they implement monetary policies okay so you have the expansionary monetary policy and also contractionary monetary policy okay so how does central bank determine whether they should increase interest rate or cut interest rate they look at economic indicators for example inflation economic indicators to determine okay what is going to be their interest rates a lot of retail feeders they classify it communicators in terms of impact for example if you look at forex factory it is color coded right so you have the high impact events moderate impact events normally it's orange color on most voice calendars and you have the low impact event okay if you're a day trader or a scoper as a start look at the high impact events pay attention to that because they tend to produce the most amount of volatility as compared to moderate and law but with that said don't ignore moderate events and also low impact events because if the actual release is very different from consensus it's going to move the market a lot but if the actual release is quite similar to consensus then it's not going to be that market moving understand what i'm saying one to two hours before the release of high impact events is going to stop you out because if you're a short-term trader your stop-loss will be very tight i know that in the retail industry like it's like the blind leading the blind everybody is looking at like indicators and then they wonder why they lose money example of lagging indicators there are many of them i can talk all day but one of the lag indicators is unemployment data so if you are scalping labor data and you're wondering why you lose money now you know coincidence there are so many but one of the examples is gdp tells you what is the current state of the economy at this moment so please don't use this to predict what's gonna happen in the future okay you can use it to confirm okay is my past analysis correct then there is a use in that leading indicator there are so many but one of the examples the most simple simple one stock market is a leading indicator of the economy so you can look at stock market you can also look at yield curves which is also a predictor of recessions especially specific to the forex market you have things like building permits if all these terms is a little bit confusing to you i'm going to go through that later on but first thing first you can understand what makes an economic indicator strong what makes it weak there are many factors that determine how strong the economy indicator would be one of the factors is the time it is released the earlier it is released the higher the impact it will be if communicators go through revisions okay certain indicators like gdp they will have three releases after the first data is revised you have the premium data which is a revised version of the advanced data then you have the final release which is the revised version of the second previous data the last one is more accurate okay but people will react more to whatever that's released first of course if the final data comes out way beyond expectations that is going to cause the markets to move a lot and of course the economic stage business cycle stage for example if right now we have an economic boom people are going to focus more on inflation indicators if right now we are at a recession then people are going to focus more on unemployment rates employment rates another one that's really important if you study the history which a communicator has the ability to predict future percentage view gdp rates and if it is predictable based on past data then a lot of people are going to pay attention to it and hence you need to look at it if you like to scout nfp and you're a beginner you don't know what you're doing don't do it just because everybody's doing it doesn't mean you need to do it all things equal and increase in the number of people who are employed then it is good for the economy good for the currency if all things being equal if people are unemployed and broke as it will be bad for the economy and hence bad for the currency don't use employment data to predict what's going to happen in the future use it to determine okay what is happening in the economy right now so there are many reports when it comes to employment you have the employment situation report you have unemployment insurance weekly claim reports and you have adp reports so what is employment so important because if you think about this consumer spending it contributes to about 70 percent of the us gdp so if more people have jobs then people are going to spend more money right and also the consumer sentiment is going to improve when people spend more money who is going to benefit from it businesses and hence they are going to hire more staff because their revenue increase and hence is going to benefit the stock markets and of course when inflation increases up to a certain level let's say if it's gold if it goes beyond two percent and the economy becomes overheated then be prepared for central banks to come in and increase the interest rates so the next indicator is gdp i'm going to talk more about this in detail in the next few videos so i'm not going to go too detailed right now okay but generally you have the nominal gdp as well as real gdp so in the economic indicators world anything that has the word real in front it means that it is adjusted for inflation because as you know that every single year the price increases like your coffee 20 years ago it was like i don't drink coffee 20 years ago so less than one dollar i think because it is adjusted for inflation it is not distorted then you should pay attention to real gdp rates so gdp is released quarterly and hence by the time it is released it is kind of like four months behind you know what i'm saying like you shouldn't be using this to predict what's going to happen in the future but it tells you what is happening to the state of the economy right now because what gdp measures is the production of goods and services by the country not sales but production a healthy growing economy would have a gdp of between three to five percent and in terms of market impacts it's not as volatile because you know why it is late by the time it is released all things being equal if real gdp increases it is good for the economy and hence good for the currency if gdp is decreasing it is bad for the economy and hence bad for the currency okay the next indicator money is applied how do you define money a lot of us define money by paper money economists define money differently they have tons of definitions they have monetary base and one supply m2 supply m3 money is applied but the main thing you need to pay attention to is just this one okay i don't want to complicate things for now if you want me to make a video on this into detail maybe i can it's very important for you to know this because the fed they talk about money supply all the time and if they talk about m1 m2 m3 and you have no idea what they're talking about then you wouldn't know what they are going to do next basically m2 money supply include m1 savings account money market accounts certificates of deposits to place simply these are okay i can't even write today plus money market mutual funds let's just put this as cds put this in simple terms it means that this are money that you can with your list of money that you can spend one thing you need to know about n2 money supply is that it is a leading indicator because it can give you a clue as to how real gdp rates are going to be in the future when there's an increase in money supply in the economy it is a sign of inflation when central banks implement contractionary monetary policy there is going to be a lack of supply in the economy and hence there will be a lack of inflation in the economy next thing you need to know pmi manufacturing and services pmi or some people call it non-manufacturing pmi so basically it's a survey that is conducted to interview purchasing managers how is your business doing these recent few months and they are going to give their answers same thing for services pmi just that it is surveying people in the services industry when you go shopping you shop in retail stores right where do retailers get their stuff from from suppliers and manufacturers so they are at the beginning of the whole entire supply chain agreement so if you're looking at retail sales to predict what's going to happen in the future you're kind of like lagging behind because the more recent data would be right in front if retailers businesses are not doing well they won't be ordering anything from manufacturers agreement and hence this indicates to you that economy has a problem so all things being equal if pmi increases it is good for the economy if pmi decreases it is bad for the economy the next thing is inflation what is used to measure inflation cpi ppi there's the normal cpi let's just call it normal cpi and you have core cpi one of the things that will distort data is food prices energy prices because these two things are subjected to seasonal factors so if you remove that from cpi you would have core cpi same thing with ppi you have the normal ppi you also have core ppi this is also what you should focus on so basically what is ppi is basically how much manufacturers are charging retailers this is what it measures inflation can be a good or bad thing depending on what role you play let's say if all you do is put money in your savings account then inflation is bad for you but if you are the bank inflation is going to be good for you because you can earn more from the spread a lot of central banks they have a mandate of keeping inflation rate at two percent if inflation rate goes beyond reasonable levels central banks are going to increase the reserve ratios and hence they are going to increase interest rates to decrease the money supply in the economy on the other hand when you have a recession central banks are going to decrease their reserve ratio and hence they're going to cut rates okay to increase the money supply in the economy so even though inflation cpi ppi is not really a leading indicator you should take note of it central banks pay attention to this and based on this factor they are going to determine what they are going to do with interest rates the next indicator consumer confidence the first one is consumer confidence index the second one is uni of michigan consumer sentiment in dex when people are optimistic they are going to spend more money when people are pessimistic about the future they are going to spend less money so basically if consumer confidence increase then it is good for the economy okay but if consumer confidence decreases it is bad for the economy sometimes consumer confidence might not translate to actual sales this is the downside of this indicator does that mean you should ignore it nope you still need to take note of it because the hedge funds use this as one of the measures and when it comes to housing indicators you have building permits you have new existing home sales when the house is starting to be built this is what it measures homes which are completely new nobody has lived in there before new home sales existing home sales people have lived in it before and potentially it can be haunted too building permits before a home is built you need to apply for a permit the more important indicator that can be used to predict what's going to happen in the future is building permits there are a lot of economic lenders that you can look at the popular ones forex factory investing.com marketwatch bloomberg if you have a bloomberg terminal that will be better but if you don't have you can still rely on these free calendars so if this is too complicated for you like there are so many indicators that you can look at right as a start try to pick two to three indicators to look at and study then for a couple of months look at how the releases of these indicators impact the currency that you're trading this is how you improve you cannot just look at the number and then be like okay it's a positive let me just buy the currency because the absolute number is not that important as compared to the expectation so you need to look at expectations not only that you need to look at the big picture what is happening in the past few months in other words the overall trend of that indicator also think about how would central banks respond to the data releases how would the monetary policy change based on this how would the fiscal policy change based on this and also how close or how far away is it from the consensus the expectations because that matters too so you have your training plan you know you have your risk management plan journal then now you have an economic indicator journal this is your fundamental analysis journal to become good at fundamental analysis you need to deliberate practice you know i'm saying so for example before the data is even released you're gonna make your own prediction and then be like it's gonna go below expectations or is it going to remain the same or is it going to improve and based on that how is the currency pair going to react to it and based on that how is the stock market going to react to it and if you're wrong at least you learn something from it you want to become a successful trader then you're gonna do the things that the typical retail trader is not willing to do the typical retail trader just wants to find a secret technical indicator just wants to make themselves feel good by watching lifestyle get rich quick videos just want to motivate themselves by looking at trading challenge videos those people who don't care about risk management they can grow hundred dollars to ten thousand dollars within a few weeks this is how the retail trading world works but does it really help if it does help there wouldn't be a 90 failure rate if it is so easy everybody can just study technical indicators and that's it putting ninety percent of your focus on the ten percent and you're wondering why karen why is it that i'm not making money i really don't know man i really don't know like that's a biggest mystery people sell you healthy stuff and you know that's good for you but guess what the businesses the restaurants that are doing well are those that sell food that's gonna kill you educators see that oh technical analysis content do better then let me just focus on producing technical analysis content and when business owners saw that oh a lot of people like fast food they are going to start more fast food businesses it's the same thing if you only like to watch garbage quick videos to give you a false sense of motivation then go ahead because if you don't help yourself then nobody can help you not even me i'll talk to you in the next video bye [Music] you

Channel: Karen Foo

Views: 11,840

Rating: 4.9305553 out of 5

Keywords: economic indicators, economic indicators crash course, economic indicators explained, how to read economic calendar forex, economic indicators leading lagging coincident, forex fundamental analysis, fundamental analysis, economic indicators and their impact, forex economics explained, forex economic calendar, forex, forex trading, forex economic indicators, forex economic calendar analysis, forex news events, forex events, trading economic events, economic calendar, economics

Id: DOpk4jj_7EY

Length: 20min 13sec (1213 seconds)

Published: Wed Dec 30 2020