62. Trading the News - Economic Numbers - GDP Part 1

http://www.informedtrades.com/
A lesson on what traders of the stock, futures, and forex markets look for when the Gross Domestic Product (GDP) Number is released.

As we have learned in previous lessons there are many components of the US Economy which can affect overall economic growth and inflation expectations. Some of the major examples here are how many people are employed in the economy vs. unemployed, how much the housing market is growing in different parts of the country, and at what rate the prices for different products in the economy are seeing increases.

As all of these things are so important to the economy and therefore to the markets, there are no shortage of economic reports which are released to try and help people gauge how things are going with different pieces of the economy. It is important for us as traders to understand the major reports here as even if we are trading off of technicals, understanding what is happening in the market from a fundamental standpoint can help establish a longer term bias for trading. In the short term an understanding of these numbers will also help to assess the erratic and sometimes extreme movements which can occur after economic releases.

The granddaddy of all economic reports is the release of the Gross Domestic Product (GDP) number for the economy. The Gross Domestic Product for the US or any other country is the final value of all the goods and services produced in that economy. Essentially what you get after calculating GDP by adding up the value of all goods and services produced in the economy is a measure of the size of the overall economy. It is for this reason that market participants will watch the GDP number closely as the rate of growth in this number represents the rate of growth in the overall economy.

As a side note here, GDP also allows a comparison to be made of the sizes of different economies from around the world, as well as their growth rates. To give you an idea of just how large the US Economy is, 2007 GDP for the United States was estimated at 13.7 Trillion dollars. This is in comparison to the next largest economy in the world, Japan which has a GDP of under 5 Trillion Dollars.

Quarterly estimates of GDP are released each month with Advance Estimates which are incomplete and subject to further revision being released near the end of the first month after the end of the quarter being reported. In the second month after the end of the quarter being reported preliminary numbers (which basically means more accurate than advanced) normally are released and then finally the final GDP number is released at the end of the 3rd month after the end of the quarter being reported on.

Traders are going to focus heavily on the growth rate released in the Advanced number and markets will also move on any significant revisions made in the preliminary and final GDP numbers.

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[wawbwc]

Save the Economy. Close down the Federal Reserve.

[marsaxod]

Federal Reserve is a Rothshild's business.

[darthstarwarsgeek]

Anyways feeling great now, it's the weekend and I've closed out everything today scoring a 20% account equity increase.

So reversal or bear rally?? What's the YouTube consensus?? Anyone?

[darthstarwarsgeek]

Accepted and sorry if I came across as harsh, had just driven from Edinburgh to London (about 450 miles) and was knackered and pretty scratchy. Good luck if you decide to read the book, alternatively I believe it is outlined in video format on YouTube & Google video.

Cheers

[ichersue]

OK, thanks

"creature from jeckyll island" didn't sound like a book title to me. i should have looked it up first, sorry about my other comment

[darthstarwarsgeek]

Creature From Jeckyll Island is recommended reading for any financial trader, who wants to gain a rounded view of our economic & monetary system.

PS. I keep close tabs on the currency markets and I know what I'm talking about.

Also I have a Business Degree & a Post Grad in Marketing, is that educated enough for you?

Look, I know you're only 19 but save your silly YouTube insults it's boring.

[darthstarwarsgeek]

I'm UK based and have noticed over the past year or so that any release from The Bank Of England (our version of The Fed) usually results in the market taking a nose dive.

In my opinion they're acting as tho' they actually want the economy to fail.

[darthstarwarsgeek]

The Fed = The Creature From Jeckyll Island

Google it.

[ichersue]

In the last few videos I've been reading comments about the Federal Reserve being "evil" and how better off we would all be if it were closed down. Am I missing something here???