Three Fundamental Analysis Indicators that Every Forex Trader Must Know

by Trading 101  //  Feb 04, 2019

In Forex trading, fundamental analysis describes the process of studying economic, social, political, and other indicators that can influence the price of a currency, whether it will rise or fall, and how it will continue to trade against other currencies on the market. Fundamental Forex trading analysis is crucial to building a successful trading profile, especially for a beginning Forex trading hopeful who has not formed a tried and true Forex trading strategy yet. However, you should know that before you begin to develop a strategy, you need to know the basic terms that will help you understand the Forex trading arena and coherently perform fundamental Forex trading analysis's on the currency pairs that you are interested in tracking. Below are three of the most commonly used fundamental analysis indicators. If you are looking to start investing on the Forex, make sure you commit them to memory.

Producer Price Index - PPI. The PPI is a family of indexes that measures the relative changes in price of domestic goods and services over time from the perspective of those producing the products or providing the services. The PPI of the United States monitors a massive range of domestic goods and services, and the government puts out a report monthly consisting of over 10,000 PPI measures. These PPI measures help to track the value of goods and services produced domestically over time from the perspective of sellers. The PPI of a given nation can be useful in determining which goods, services, and industries will grow in the near future, and can help to indicate the relative economic strength of a currency based on the nations attached to it.

Consumer Price Index - CPI. The CPI is a family of indexes which measures the chances in prices that consumers must pay to buy goods on the market. When you hear the word "inflation" on your local news, most of the time they are referring to a general rising trend in prices of products across the CPI. The CPI tracks everyday services and products that consumers regularly purchase, which can include gasoline, bread, and automobiles. It is sometimes referred to as "headline inflation."

Gross Domestic Product - GDP. The GDP of a nation is one of the most-often talked about indicators of economic health. It is the total combined value of all of the goods and services of the finished products held within a country's boarders at any given time. The GDP of a nation is important because it gives a quantitative comparison that can be used to gain a sense of how much money a country is able to make through exportation of goods and services. A nation with a stronger GDP will, in accordance, also have a stronger currency value.

Paying attention to the financial and political news from the countries in which you are interested in pursuing in your Forex trading profile can make or break you as a trader. One of the first things that beginning Forex traders can do to help ensure that their trading ventures are successful is to find a source for unbiased and comprehensive international news. BBC, The Financial Times, and Aljazeera News are all excellent places to start. You will also want to follow national political news sources for countries you are specifically interested in for you Forex trading profile.





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