How Can Traders Use Economic Data from the HPI to Gauge Market Sentiment?
Dec - 14 | No comments. | Blog
When people discuss the concept of profitability in financial trading, it is all too easy to forget that there are a number of individual niches and accessible instruments. From trading physical stock and commodities to profiting from derivative products, it is possible to create an investment strategy that suit’s a specific skill-set or knowledge base.
Experienced traders will also testify to the importance of being able to gauge market sentiment, especially when dealing with volatile instruments such as trading with currency and CFD’s. There are numerous ways through which the trends and sentiment within the marketplace can be identified, however, with wider economic data providing a particularly telling insight.
The Application of Wider Economic Data: How Can it Boost Trading Performance?
While those who trade financial instruments such as currency may be able to profit regardless of the wider economic climate, it is still vitally important that they are in touch with the prevailing market sentiment. By having insight into the mindset of fellow investors and how this will impact on trading volume and prices, it is possible to time your transactions well and ideally maximize your return. The challenge is to decipher which economic factors are the most telling.
One particularly useful tool for traders is the Housing Price Index (HPI), which enables viewers to see the prevailing trends in property value either nationwide or within a specific geographical location. Investors can evaluate the performance of property value throughout the UK and develop an understanding of whether it is rising or falling, which subsequently offers an insight into consumer confidence and the sentiment that exists among financial institutions.
What the Current HPI Means for the UK Markets
Over the last 2 years, the HPI has accurately reflected the dominant trends within the financial markets. During the 12 months between September 2011 and September 2012 UK house prices have risen 1.7%, which although representing a 1.9% decrease on the previous year has at least created a relatively stable and consistent market. At the same time, the UK financial markets have also experienced steady growth and even reported six consecutive months of improvement between June and November this year.
While the HPI is one of the most purposeful tools that traders use when evaluating market sentiment, it is by no mean the only one. Also of interest is consumer confidence, which often reflects a thriving economy and a prosperous retail sector. This is especially relevant for those who invest in company stocks and commodities, as it allows investors to understand how much money is being invested into the market and the wider economy.
The Final Word
Given the rising popularity of online currency trading, it stands to reason that investors should also use the World Wide Web to source external economic information. While online trading platforms deliver technical analysis and insight into market conditions, a wider range of economic data can be evaluated to gain a greater understanding of the prevailing sentiment. This may offer traders a critical advantage within the marketplace, especially during periods of global recession.