Investology

Investment Success Through Economic Indicators

Effective and successful investing usually also involves looking at various indicators to get the current state of the market and then making the right decisions. With many indicators probably affecting certain markets in one way or another, there are certain ones that generally may provide investors with a means to gauge what direction a market may be proceeding. Economic indicators may provide a way for them to consider risks and opportunities that may be available in trading markets.

What Are They?

Basically, economic indicators are composed of certain economic statistics that provides investors and traders with an idea of the previous and prevailing economic environment. Economic statistics such as local unemployment rate, inflation rate, Gross Domestic Product of a country, and other data may provide an indication whether a certain market will be doing better or worse in the next coming weeks or months.

Economic Indicator Characteristics

There are certain characteristics that make economic indicators quite valuable to traders and investors in terms of the data that they provide. One of them is on how the said economic indicator is related to the business cycle. An economic indicator may be something that moves in the same direction as the economy. It can also be an indicator that moves in the opposite direction.

Another characteristic of economic indicators that prove valuable to investors and traders is the frequency of available data. The more frequent the economic data is updated, the better measure they are in determining market direction. Still another important characteristic of economic indicators is the timing of its effects.

Some economic indicators affect economies differently in terms of when the effects begin to manifest. Some such indicators may change first before any effect on the economy can be seen. There are also economic indicators that won’t change until several months or quarters after the economy starts to show the effects of the said change. There are also indicators that move in conjunction with the changes in the economy at the same time.

Tags: economic indicators