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Indicators are statistics used to measure current conditions as well as to forecast financial or economic trends. Economic indicators are statistical metrics used to measure the growth or contraction of the economy as a whole or sectors within the economy. Technical indicators are used extensively in technical analysis to predict changes in stock trends or price patterns in any traded asset. In fundamental analysis, economic indicators that quantify current economic and industry conditions are used to provide insight into the future profitability potential of public companies.
What is an ‘Indicator’
BREAKING DOWN ‘Indicator’
There are many Economic indicators created by different people in both the private and the public sector. The Bureau of Labor Statistics, which is the research arm of the U.S. Department of Labor, compiles data on prices, employment and unemployment, compensation and work conditions and productivity. Within the price report is information on inflation, import and export prices and consumer spending.
In the context of technical analysis, an indicator is a mathematical calculation based on a security’s price and/or volume. The result is used to predict future prices. Common technical analysis indicators are the moving average convergence-divergence (MACD) indicator and the relative strength index (RSI).