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Chapter 25, Part II. Buying and Selling the News. Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 26, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    To successfully trade on data directionally you have to see the larger picture. Study the dynamic of retail sales for extended period, so you are able to compare year to year growth and the overall trend. It’s better if you will have some regression model of forecasting retail sails, based on its link with other data, so that retail sales are in a row with the overall economy and so on. In other words, for directional data trading, you must understand how particularly this data will be built into the overall picture. Will it have influence or not on the overall tendency? For instance, for changing the fundamental situation you need really outstanding numbers. In this case – whatever upside surprise will happen – it will not launch a significant move on markets.

    So, I suppose, you’ve got the idea, so let’s focus on some examples…

    Here is a typical preparation work on the release date. First, you have to look at the overall trend in Retail Sales. Since this release for September, there were no significant holidays that could lead to a jump in sales. From that point of view everything is clear.

    Now you have to investigate fundamental aspects of the current situation in the economy. You see that there was some reversal point in retail sales. Also you see the upward tendency in other data – personal consumption, reduction in unemployment, GDP growth. That coincides with your observation of changing in retail sales trend during the previous year. Also you see repeating growth in retail sales on a year to year basis and see that GDP has reached the pre-crisis numbers adjusted for inflation. So, your view on retail sales is moderately bullish. Probably your regression forecasting model tells that the real number should be slightly greater than expected.
     
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