Economic Indicators Tutorial

An economic indicator is an economic statistic (periodic-release) that aims to provide information regarding how an economy or an economic zone has performed during a particular period.

  • All economic indicators are divided into three categories based on their attributes:

(i) Procyclic Indicator: Moves in the same direction as the economy (for example GDP)

(ii) Countercyclic Indicator: Moves in the opposite direction as the economy (for example inflation or unemployment)

(iii) Acyclic Indicator: Has no relation to the economy

  • All economic indicators are divided into three main categories based on their timing:

(a) Leading Indicator (Before): Leading indicators change before the economy is changing and can be used as signaling-mechanisms of upcoming macroeconomic conditions. The Consumer Confidence Index (CCI), the Home Sales Report, the performance of the Government Bonds, and the Stock-Market Index can be considered as leading indicators

(b) Coincident Indicator (At the same time): Changes at the same time as the economy is changing (for example GDP)

(c) Lagged Indicator (After): Changes a few quarters after the economy is changing (for example unemployment)

What are Trend Indicators? Trend indicators are technical analysis tools that use price action to recognize price patterns and identify the true direction of the trend.

Trending/Ranging Financial Markets

(i) Trending Market: When the price of a Financial Asset or Market follows a particular trend during a long time period

(ii) Ranging Market: When the price of an asset or a market moves up or down without following a particular long-term trend (Trading within a range formed by an upper and a lower band)

Trend Indicators are Reliable only in Trending Markets

□ If a financial market is trending, the trend indicators can provide considerably reliable trading signals

□ If a financial market is ranging, trend indicators may mislead traders (In the case of a ranging market, traders should better use momentum indicators which are able to identify short-term price movements within the range)

Table: Trend Indicators at ExpertSignal.com

  UTILITY SETTINGS MORE
□ Standard Deviation (SD)
  • Measuring Volatility
  • Confirming Price Reversals
  • 20/21 Periods
► Standard Deviation
□ Moving Averages (MAs)
  • Evaluating Trends
  • Spotting Reversals (MA Crossovers)
  • 30-period
  • 50-period
  • 200-period
► Moving Averages
□ Parabolic SAR
  • Identifying Trends/Reversals
  • Catching a trend reversal and following it using a trailing stop
  • 2% acceleration factor
  • 20% maximum step
► Parabolic SAR

□ Bollinger Bands (BB)

  • Measuring Volatility
  • Identifying Reversals
  • Entry/Exit Triggers
  • 20 Periods SMA
  • 2 SDs
► Bollinger Bands
□ Ichimoku Kinko Hyo
  • Evaluating Trends
  • Overbought/Oversold
  • Spot Trends/Reversals
  • Tenkan-Sen (9)
  • Kijun-Sen (26)
  • Senkou Span (52)
► Ichimoku
□ Fibonacci Sequence
  • Calculating Support & Resistance Levels
  • 0.618 level
  • 0.382 level
  • 0.236 level
► Fibonacci Trading

Candlestick patterns are specific price formations identified on a candlestick chart

Candlestick patterns are specific price formations identified on a candlestick chart. These patterns are useful as a tool for forecasting future price movement and especially as concerns forecasting trend reversals.

 

Introduction to Candlestick Patterns

Candlestick patterns recognition can be made manually or it can be part of an automated process via the use of specialized software.

Candlesticks Formation

A single candlestick includes information such as the high, low, opening and closing price of a particular trading period. Every candlestick includes:

(i) A Body, which reflects the opening and closing price

(ii) The Shadows (or wicks or tails) which reflect the higher and the lower price of the period

-The bullish candlesticks are colored in White or Green

-The Bearish candlesticks are colored in Black or Red.

 

Here are the most important recognizable candlestick patterns:

  1. Doji (Bullish / Bearish Doji)

  1. Hammer / Hanging Man

  1. Shooting Star / Inverted Hammer

  1. Morning Star / Evening Star

  1. Harami (Bullish / Bearish Harami)

  1. Marubozu (Bullish / Bearish Marubozu)

  1. Three White Soldiers / Three Black Crows

  1. Spinning Top (Bullish / Bearish Spinning Top)

  1. Railway Tracks (Bullish / Bearish Tracks)

Trading with the Ichimoku Kinko Hyo

(一目均衡表)

Usage: Evaluating the Trend | Identifying Overbought/Oversold Levels

◙ Trading: Spot Strong Trends/Reversals

Standard Settings: Tenkan-Sen (9), Kijun-Sen (26), Senkou Span (52)

 

Introduction to Ichimoku Kinko Hyo

Many Forex professionals consider the Ichimoku Kinko Hyo as one of the best technical analysis tools to trade the Foreign Exchange Market. The Ichimoku Kinko Hyo was developed by the Japanese Goichi Hosoda back in late 1960. The indicator can be used in any financial market (Forex, stocks, etc).

What distinguishes the Ichimoku Kinko Hyo from other indicators is its ability to provide a complete and quick picture of the current market conditions via the Quick Equilibrium Chart. Ichimoku Kinko Hyo can also indentify strong trends and reversals at just a glance.

 What distinguishes the Ichimoku Kinko Hyo from other indicators is its ability to provide a complete and quick picture of the current market conditions via the Quick Equilibrium Chart

Understanding the Full Set of Trading Orders

The variety of trading orders offered by our modern platforms is very helpful in covering all trading needs and the variety trading strategies. These are some key advantages of using a full set of trading orders

Selecting and placing the right trading orders can really make the difference when trading manually any financial market. 

Why a Full Set of Trading Orders Matters?

The variety of trading orders offered by our modern platforms is very helpful in covering all trading needs. These are some key advantages of using a full set of trading orders:

→ Apply effective money management

→ Adapt to any market conditions (limit orders)

→ Minimize the loss potential and protect account (stop-loss orders)

→ Run and protect profits (trailing take-profit orders)

→ Time trades (GTC, GFD orders)

→ Trade short-term price fluctuations (from entry to exit)

→ Implement multidimensional strategies (OCO orders)

Bollinger Bands

(BB)

Usage: Measuring Volatility | Evaluating Oversold/Overbought Markets

◙ Trading: Identify Reversals (entry/exit triggers) in any Timeframe

Standard Settings: 20 Periods SMA and 2 Standard Deviations

 

 Introduction to Bollinger Bands

The indicator was created by the money manager and researcher John Bollinger.

Bollinger Bands are two (2) volatility bands that are placed above and below a moving average. The Bollinger Bands can be used to measure volatility but also to evaluate the strength of the trend.

When the distance between the two bands widens then the volatility increases

When the distance between the two bands is getting narrow then volatility decreases