Forex Trading – Top 7 Economic Indicators That Can Make You Money in Forex Trading

The key to making money in the Forex Trading is understanding what makes currency pairs move. Well, it’s the fundamentals that make currency pairs move but yet not all the economic indicators are important. So which are the ones that can really shake the currency market? Below are some of the important ones which you can use as forex trading strategies:

1. Interest Rate: This is the most important economic indicator and it rules the forex market.
Economies with higher interest rates tend to have stronger currencies and investors are always looking for the greatest possible investment returns.

You will realise that if there is any changes to the interest rate to countries like United Kingdom, Europe, U.S etc, be it cutting or raising, most of the time there will be big movements in the forex trading market.

For example, if Europe has an interest rate cut, investors will sell Euro, which has a weaker currency now and invest in Great British Pound instead, which has a higher interest rate.
Central banks have to raise interest rate if there is too much inflation and you have to watch these two economic inflation indicators as the central banks will be looking at it too:

2. Consumer Price index(CPI): The higher the index is, the stronger the economy will be. Thus, forex traders may push the currency of that particular country higher if they find confidence in the index.

3. Producer’s Price Index(PPI): If prices for producers are rising, they will most likely pass those costs onto consumers. This lead to higher inflation and stronger currencies.

4. Gross Domestic Product(GDP): It is reported quarterly and is the primary indicator of economic strength. A higher GDP is often associated with higher interest rate, which is frequently positive for the currencies.

A forex trading tip: Sometimes you may see a currency pair dipped drastically because the actual results of the GDP is much lower than the forecast, so you might want to consider following the trend and sell that currency pair.

5. Payroll Employment: Monthly measure in payroll employment reflects the number of new jobs created or lost and is an important indicator of economic activity. In forex markets, large increases in payroll employment means that the strong economic activity could lead to higher interest rates, which is seen positive for the currencies.

6. Retail Sales: It is a measure of the total receipts of retail stores and is a major indicator of consumer spending. Rising retail sales are associated with a strong economy, which leads to rising currencies.

7. Durable Goods Orders: It is a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. It is a major indicator for manufacturing sectors. Rising durable goods orders are associated with a strong economy which leads to stronger currencies.

You may learn to trade forex by catching some good opportunities when there are news releases for the above economic indicators. Although the forex market is fundamentally driven, the best way to trade forex is to combine them with forex technical analysis and a forex trading system, which can be found in my “Forex Trading to Riches” ebook.

Daniel S.

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About Matthew Anderson

Matthew Anderson is a 20 year veteran of the currency market, having worked as a senior trader and analyst at some of the world’s leading international banks. In addition to overseeing fundamental and technical research at, Matthew is involved in the blog and video blog. Matthew has also published numerous articles on short-term trading strategies and risk management.
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10 Responses

  1. Why do I keep losing money at forex?
    I’ve been studying the foreign exchange market hours each day for over a year. I’ve also read piles of books on technical trading strategies, economic indicators, market timing, psychological discipline, stocks, bonds, futures, options, etc. I practice trading forex on a demo account as well as on a real mini-lot account. No matter what I try, my results are always slightly worse than 50/50. I’m seriously beginning to think that NOBODY trading forex makes any money in the long run. I don’t just say this because I suck, but because I think it is statistically impossible to win at a game of random incremental price movements after paying a spread. I’ve sometimes made up to $20,000 on my demo platform, but I always eventually lose more than I gained–which is exactly how I would expect to perform at a completely random game after paying a fee each time I play. Don’t get me wrong when I call it a game: I take trading very seriously.

    Does anyone consistently make a profit trading forex? Please don’t answer this question in the affirmative unless you yourself make consistent profits.


    I wasn’t expecting such an undertone of aggression, but I think I understand why so many of these answers border on insulting. In psychoanalysis, this is refered to as "projection." It is likely that none of you have ever held on to any profits trading forex, but you devoutly believe in the religion of technical and fundamental analysis and do not want to come to terms with that fact that your devotion has not payed off financially–YET (of course). I know exactly what it feels like to be a learned master of trading principles and techniques but personally unable to make any money at it. It’s very frustrating, isn’t it? I’m convinced that EVERYONE online (or almost everyone) talking about forex is knowledgeable about the concepts but nevertheless unable to do anything about it. It is easy to discuss scientific-sounding nonsense like fibbonacci retracements, stochastic oscillators, linear regression, Bollinger Bands, EMA and MACD crossovers, support and resista
    nce levels, candlestick patterns, and so on. For the record, I have read all the books I claim to have read and continue to read, and I practice regularly with different trading systems, none of which so far have been successful more often than they been unsuccessful. My failure rate is consistently slighlty less than 50%. And here’s the thing: that is EXACTLY how you should expect to perform when the odds are 50/50 minus a charge for the spread.

    Try this. One of the systems I use is the coin toss. I have found that it actually does no better and no worse than any other system, though of course I haven’t tried them all. I doubt that a better system exists.

  2. Because you keep doing it.
    References :

  3. You must be doing something wrong (sorry to state the obvious). Even if it were just down to chance you would have winning streaks. You must be taking some action based on erroneous information. I suggest you throw out all your knowledge so far and start again. Seriously! And I can’t think of a better answer (except do the opposite to what your are doing now!)
    EDIT. If JoeyV were right (and I usually respect his knowledgeable views) then you would expect your trading success/failure ratio to have improved. Of course in reality it is difficult to junk all your previously gained knowledge anyway. But as I say JoeyV is usually right.
    References :

  4. I like your question about Forex. I have actually profited from forex. One thing is that forex is the most difficult market to trade on. The trading techniques may not be difficult but emotional part of it is difficult.

    when I was learning to trade for the first time, I carry out about about 200 demo trade and have about 98% winning trade. With this great success I taught I was actually ready to trade live currency. I invested a little amount and lose everything.

    I went back to the drawing board and do more practise on the financial management aspect of forex. For my second set of trades, i invested about £500 in a Better platform and within my first 2months of trading using a very low margin, I was able to make a profit of £1200.

    Because the forex market is controled by a lot of different factors, it is difficult to make continuous profit. What mmattersis that your overall monthly profit should be more than your lose.

    Have you ever tried to trade using a Robot? check out this forex traiding robot. It has help alot of people to trade in profit.
    References :

  5. Raysor’s suggestion that you throw away everything you have learned because you have been learning for a year is wildly stupid. This is part of the process. There is lots and lots of nonsense out there. I worked with a guy whose name you probably know who has written a ton of books on trading FX and his results with vastly more resources than you have were only slightly better than break-even.

    It’s a very tough game but you aren’t quite right.

    BTW – I can’t do it successfully myself except as a component of global macro trading.
    References :

  6. How long do you have to keep doing this before you grow a brain and get into some other business? If you had fully researched the market you would have realized two things: The entire business is dishonest right from the start, and you are competing with the best in the world. It is not wise to deal with known crooks, or to compete against people whose skills are superior to yours.

    Take a course in ECON 101 at the community college. Ask the professor what other courses to take. Keep studying until you don’t need advice from anybody. It will be the best investment you’ll ever make. Right now it is not possible to justify investing in anything but physical metals, cash and carry, storage by Sealy Posturepedic, insured by Smith and Wesson.
    References :

  7. I wonder how well you are applying Charting techniques? I don’t trade in currencies but I have played around with the charts a bit. Just using MACD properly should improve your game a bit and if you combine it with Bollinger bands it should help a lot.

    Here is a chart of the $Cdn/$USA

    this is the type of chart I would use if I was doing Forex. For some reason the MACD is pretty small

    I would have liked to have BBwidth but this chart does not use it…I would also like Slow Sto but while it does have it the parameters are not variable so I would not use it….also I would like the RSI to have a 30 unit look back but this chart only gives you a 14 unit lookback.

    I would pick my shots with care…

    From Midnight to 5am on this chart you can see this is wedge shaped in its resistance/support lines
    Can you see it? Draw the lines or do what I do and use a stiff piece of paper (business card) to imagine the lines on the screen.

    You forget about the values until they reach either line….Look at the indicators at about 6am when the values touch that support line…see the MACD fall…a while later the RSI shows its true stripes…the DMI (also known as ADX) shows the red line rising over the blue (bearish)…the Black line is strongly positive showing a strong price trend …in this case bearish.

    When does this end? On the MACD when it slopes positive (we cannot see the signal line but it should cross the MACD line)…the RSI should turn to a positive slope…the DI+/_ should move towards eachother.

    This is just a sample of how I would look at a currency chart….play with something like that and see if it helps you. If I had control of the indicators I would use RSI(30) instead of RSI(14) and DMI(30) same as ADX(30) as the 30 unit look back gives easier to read lines.

    I doubt you use Technical indicators as I do…try it out on paper and see if it works for you
    References :

  8. 50/50 is an acceptable win loss ratio…. many traders lose 60%+ of the time.
    "Consistent profits"… what’s your definition of "consistent profits"? My definition would be year over year (especially with Forex).

    I doubt that you’ve truly read the books you claim to have. You would know that 50/50 is good. The key is win/loss ratio. You mention nothing about the system you developed. You use a demo program (when any well read trader knows that demo programs mean nothing). You would know that technical analysis gives you the assistance to find good stops and targets (which helps get you the win/loss ratio you need…. or you won’t even try the trade).

    Even if you understood & use everything I’ve pointed out….. most people don’t make money at trading…. less make money in trading Forex. If you had read so many books (as you outlined) you should clearly be aware of this.
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  9. You are just one of the many naive amateurs that the pros eat for lunch.

    Most amateurs end up losing money and exit the field in disgust, and disappointment, after some time. You will very likely be joining their ranks shortly.

    But don’t feel too bad, many are in that class. I am one of them, having lost a lot in my younger days when I was, like you, a hopeful and naive guy with visions of making money easily and quickly.
    References :

  10. You left out the most important piece of information: your choice of time frame. Shorter time frames like 1-minute bars are random. A bank might get their next 10MM order from a customer now or five min from now. You can’t trade short term news either. The big banks have traders 24/7 watching multiple premium news feeds. By the time you and I find out about it, the banks have already digested the information and taken their positions and moved on.

    Stick to longer period charts.
    References :

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