What Traders Can read from Coincident Indicators

Traders utilize different types of indicators to make predictions and market overviews. The most common indicators help to build permits. They may suggest the future volume as well as potential trend and price direction for stocks, corporate profits, business inventories, and other assets.

Other indicator types may follow the same way as the economy does or change. Every time you observe a sale, you may actually see the example of coincidence indicators. They hit the bottom or peak the same way as the overall economy. In this situation, lagging indicators appear to be useless to make predictions.

In this review, we will show how to use coincidence indicators and what they can tell traders.

What Are Coincident Indicators?

Generally, they are metrics that are used to overview the current economic state. They depict economic activity with a given field. They cover some of the most crucial factors such as real earnings, employment rate, manufacturing working hours, and more. The key features to consider when using coincidence indicators are as follows:

  1. They mainly refer to metrics that reflect current economic conditions. They can be applied to a given country, state, or nation.
  2. To get a full overview of the economy, coincidence indicators should be used with lagging and leading indicators.
  3. To eliminate the noise of individual indicators, they can be compiled into an index. It ensures reliable measurements and stats.

How to Read Coincidence Indicators

As stated earlier, they refer to the type of macroeconomic metrics. What’s more, they are able to reflect the present situation in the economy. All economic indicators can be divided into three major groups:

  • Lagging – change after the economy changes,
  • Coincidence – show the current economic situation.
  • Leading – help to define the direction of the economy.

To make the most of the analysis and market insights, it is better to use coincidence indicators in conjunction with the rest two groups. Investors will be able to see not only the present conditions but also where the economy is going. As a rule, coincidence indexes are provided by the federal reserve publishers.

What Coincidence Indicators Tell

First of all, they ensure a real-time assessment of the overall economic performance along with some of the most crucial factors that determine its potential movement. Secondly, indicators provide investors with a snapshot of future perspectives along with such metrics as industrial production, working hours, personal income, etc. As a result, you may see how the market responds to specific factors that move the economy.

Coincidence indicators follow three major cycles:

  1. Industry.
  2. Commerce.
  3. Economy.

Taking into account all of these three factors, it is possible to determine the effect made on trends and policies.

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For example: let’s say, you come across the report about solar panel manufacturing upsurge. It means that the entire industry of alternative and renewable energy sources will be definitely influenced by this factor.

Additionally, investors may explore the current demand for employees by the industry leaders as well as their activity and performance levels. If you see increasing salaries, it means that the company is boosting its activity in the market. In other words, it has increased revenues with the ability to pay employees more.

In this example, payroll data appears to be a type of coincidence indicator that also depicts the overall employees’ capacity and funds invested. 

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.