Market MoversWhat Is A Market Mover?
If you’re willing and ready to experiencerisky and exciting trading following financial news, here's all you need to know.
Every daysome news enters the market, trade participants make decisions according to the news circulating every second. Not all news is relevant for fast traders, so we have to split the news into market movers and non-market movers.
Market movers are all those news that give direction and increase short-term volatility. Before their publication, the market has low volatility, as identified by the Bollinger band indicator. The indicator appears in a classical squeezedform, with the upper and lower band shrinking to form a funnel.This particular configuration means that the market is compressed. Regardless of the outcome of the day, the trader could take advantage of this particular condition of the market by using the break-out technique, that is opening the position following the break-out of support or resistance that are ideally matching the outer bands. This technique will be detailed in a specific article and you can find any explanations of the individual data and also the main economic news on our website.
The four strategic market movers you need to know are:
The non-farm payrolls (NFP) provide a report on the US labor market, which is released every first Friday of the month. This data is very important as it shows how many jobs have been created. If jobs are higher than expected we can invest by buying dollars, or if instead jobs are less than expected you can invest by selling dollars.
It’s interesting to invest in currencies related to the dollar which are mostly not influenced by other ongoing news and trends.
The consumer price index (CPI) indicates inflation or the deflation of a country. Inflation indicates a considerable rise in prices, while deflation indicates a contraction. From a trading point of view, the CPI released with values higher than analysts' expectations is an indicationthat the currency the data is related to will rise and therefore a good time to buy it. On the other hand, depreciation signals a good selling opportunity.
On the European side it’s important to avoid following the data of individual countries which don’t affect the common currency, except for Germany, which could have an impact on the Euro.
The Central Bank Decision deals with thequarterlymeetings of the central bank,where interest rates are decided. If the interest rates of a given country increase, its currency will rise in the short term and therefore it’d good to buy it, otherwise it’s good to sell it.
Gross domestic product (GDP) is another indicator of the health of a country. A country's GDP measures the percentage increase in production over a period of time. A GDP growth of a nation suggests economic growth. Three consecutive negative GDP results indicate that the country is in economic recession: an opposite result would indicate an economic expansion. The following macroeconomic news impacts not only on the currency market,but also on the stock and bond markets.
Non market movers
These types of news are not relevant in the short term, therefore are of very little use for operational purposes. However, today's market movers were most likely no market movers yesterday. A typical example is Great Britain’s exit from the European Union: the referendum rumors started to spread at least two years ago, after the collapse of Greece. This example teaches us that all news are essentially useful, but its impact on the markets happens at different times and musttherefore be followed with particular attention.
the Analyst's answerJean Grossett - Financial analyst
Keeping tabs on the above mentioned market movers is a veryuseful habit to keep. Though they are very useful, they still do not highlight an efficient timing of the markets. Using them in combination with technical, and price action tools mentioned in some other articles on this website fortifies timing entries and consequently trading success. Following higher time frames such as weekly and monthly time frame analysis could also help in avoiding whipsaw and whiplash common in smaller time frames. The use of proper risk and money management strategies cannot be over emphasized.