Macroeconomic Indicators | Trading Markets in Four Steps

Macroeconomic Indicators | Trading Markets in Four Steps

A Step by Step Guide trading using Fundamental Analysis (Economic Indicators) in Financial Markets

Do you know the #1 reason why many retail traders under perform compared to their market counterparts namely - inter-bank dealers, hedge funds, financial institutions?

Studies suggests that despite retail traders having strong requirements to be well informed they are not. They do not anticipate returns on trades, lack trading acumen and are emotional when trading.

Not many traders can make the connections between the economy, central bank actions and financial instrument prices.

However there are just 4 steps that simplify the process of making the connections between these three factors easier.

The 4 steps are - 

Step 1 - Identify the price determinants of financial instruments - stocks, bonds and FX

Step 2 - Understand how each economic indicator contributes to either economic growth or inflation (we use an economic map to demonstrate these connections); economic indicator release dates; who compiles them; leading, lagging or coincident indicator; 

Step 3 - Study the impact of each economic indicator on financial instrument prices - classify the impact as high, medium, low. We will also visit websites that make it easy for traders to track these indicators

Step 4 - Make the connection between economic indicators, central bank’s monetary policy impact and financial instrument prices to trade financial markets. With the help of a spreadsheet we will record data that will improve our chances to predict asset price movements before and after an economic data release. 

The Use of an Economic Map 

We make these connections between economic entities, factors, markets and central bank policies through the use of an economic map. The economic map helps us to understand how each small sub-component aggregates to the larger components, which in turn aggregate to the Gross Domestic Product thus giving us a wider perspective of how entities interrelate with one another.

Some of the economic indicators we will study are: 

• The Quarterly GDP Report

• Car Sales Report

• Retail Sales Report

• Personal Income and Outlays Report

• Housing Starts

• Durable Goods Orders Report

• Factory Orders and Manufacturing Inventories

• Construction Spending

• Trade Balance Report

• Purchasing Manager's Index 

• Employment

• Industrial Production

• Leading Economic Indicators

 Skills you should be able achieve by the end of this course

By the end of this course, you will have all the tools necessary to start trading by making the connections between these economic indicators, financial markets and the central bank's monetary policy. This is the knowledge that investment bankers acquire during their trading experience and it is this technical skill that we will achieve by the end of this course.

As a bonus - all the chapters of "Tradeonomics - The Four Steps to Mastering U.S. Economic Indicators" on the Amazon/iBooks store are embedded in the lectures as pdf files.

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Students also looking to supplement their trading skills can visit another course on this platform - TECHNICAL ANALYSIS OF FINANCIAL MARKETS : INVESTMENT BANKING

As a trader in investment banking I relied purely on technical analysis for the first  few years. Drawing trendlines, using technical indicators such as moving averages, MACD, RSI etc etc to predict returns in the FX markets. 

"Market Analysis can be approached from either direction (Technicals or Fundamentals). While I believe that technical factors do lead the known fundamentals, I also believe that any important market move must be caused by underlying fundamental factors. Therefore, it simply makes sense for a technician to have some awareness of the fundamental condition of a market." - John  J. Murphy, Technical Analysis of the Futures Market 

Applied Finance - How to trade in any financial market using macroeconomic indicators.

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What you will learn

• Increase your financial intelligence by understanding economic indicators, their influence on financial markets and the central bank's reaction.
• Essential course for FOREX, Bond, Stock, Commodity traders on Fundamental Analysis
• Learn by completing multiple projects on the impact of economic indicators on financial instruments, calculations of nominal and real GDP, growth rates etc

Rating: 4.15

Level: All Levels

Duration: 7.5 hours

Instructor: Mikesh Shah