Traders and investors are not only looking at conventional economic data as their basis in decision making. Thus, the financial market has became its own leading indicator.

estimation expectation and rumour

Changes in market dynamics mean that market players are no longer waiting for a definitive data releases to make decisions. Nowadays, they do their own calculations, so that when the real data appears, they could digest it faster. In this context, we were introduced to the concept of estimation, expectation, and rumour.

These three have become an integral part of the routine price movement in today's modern financial market:

  • Estimations: Market estimates before the data release
  • Expectations: Market is more confident about a prediction before the data release
  • Rumors: Information from unknown sources before the data release

Markets often rely on those three to analyze and decide whether to buy or sell them. To understand how they work, let's take a look at this article.

 

Estimations

Economic data are released periodically, in yearly, quarterly, monthly, and even weekly. Before the datas are open to public, many analysts will announce their estimations on whether it will go up or down, and in what kind of number. Not many people can do this kind of analysts, that's why the informations are sought after by common traders and investors alike.

Estimations usually released by private companies, state body, or news offices like Bloomberg. News offices knew that many people need it, so they surveys a certain number of economists and analysts to determine the estimation of the upcoming data. The estimations will differ from one to another, but there usually will appear 'consensus' among them. This consensus is an unrestricted agreement where market participants approve the data estimation will be formed within a certain range.

 

Expectations

If estimation is done through scientific ways, then expectation refers to the psychological factors in the market. Market expectation resembles cumulative 'hopes' in regard of a certain information. Because it is 'expectation', it could be either positive or negative.

Although estimation is already a done deal, expectation will still present. This is due to the psychological factor of the market. At one time it could be high on optimism, at another it may drown in doubts. If the market expectation is positive, it will be an additional encouragement for the market to move forward. But if it's negative, it will put pressure on its movements.

It is difficult to measure expectation, whether positive or negative, optimistic or pesimistic, as it is a psychological thing. However, there are times when it is quite easy to see. That is when market participants are sure that the upcoming data release will be better or worse than estimation. So, estimation is an approximate measure of data or analysis; while expectation is market confidence level toward estimation.

 

Rumours

Similar to celebrities gossips in infotainments, the financial market also has rumours. The source of rumours, too, usually is the mass media. Reporters often come up with sources who don't want to be named due to some reasons. Informations from these sources, that is what we call by 'rumour'.

Rumour could be positive and negative, depends on what they are about and the market opinion on the source's legitimacy. If it's positive, the market will strengthen. But the market will go to a completely different direction if it's negative.

Apart from reporters, a limited number of people sometimes able to hear the rumors early. Those who do will surely get the most benefit, because then they would have made investment decision earlier than other market players. However, the authenticity of rumours are much more uncertain than estimation or expectation. Believing the wrong rumour could slam you to the gutter.

 

Anticipating Estimations, Expectations, and Rumours

In forex trading, you should not hurry to act just because you listened or read certain informations. Being careful is important for a trader. Therefore, there are two things you should do to anticipate estimations, expectations, and rumours:

  1. Observing Fundamental Calendar
  2. Following Trading Plan

Fact says, failure in trading are mostly caused by having no trading plan or not running it with discipline. Whatever the spreading rumors said, be aware of fundamental calendar, make your own trading plan, and follow it.

Estimations, expectations, and rumours have become an integral part of financial world. It means, traders and investors must able to anticipate them in order to make qualified decisions.