To be successful in the forex market it is obviously necessary to understand the basics in foreign exchange. Knoing how to analyse charts and trends is one thing but it is equally important to understand the underlying reasons why various currencies around the world are constantly moving relative to each other.
Being able to understand what influences a currency movement and correctly predict a movement in one direction or another is what makes a successful forex trader. Let us look at the major influences :
1. Current Affairs
Be aware of the current affairs around the world especially within the major world economies. like USA, United Kingdom etc Monitor national and international news channels for such events as political unrest, social disorder and in particular financial news and major announcement by world leaders and financial leaders like Bernanke etc.
2. Unpredictable Events
A major natural disaster or significant terrorist activity can influence a sudden currency movement. You should always protect your trades from unpredictable events by using stop losses to minimize the affect of a sudden adverse currency movement.
3. Predictable Events
A political event such as a general election is predictable. A major international sporting event such the Olympic Games is predictable. The important thing here is to be able to understand which currencies are likely to be affected and in which direction they will move. It's not just the events themselves which may influence a currency movement but also the announcement of such an event. So be aware of the timing of such announcements.
4. Financial Reports
Be familiar with the timing of monthly financial reporting from countries of influence like USA . Announcements by world leaders concerning GDP, interest rates, inflation etc., will often influence currency movements. Monitor the financial results for the major international companies, particularly the banks and other major international financial institutions.
5. Rumors
It's difficult to avoid rumors but you should be very careful if making a trade based on a rumor because very often a rumor is simply no more than just a rumor and often a rumor is spread to fool traders into thinking the market will move one way when in fact the opposite happens.
6. Currency Pairs
You should pay particular attention to applying foreign exchange basics in the two countries concerned with your currency pairs. It is a fact that the US dollar has the strongest influence on other currencies particularly if one of the pair is a minor currency.
The problem for any beginner in forex trading is how to apply all this fundamental analysis to successful trading. The best advice I can give is to gain experience with fundamental analysis and how each type of influence effects currency movement before you use it to make real trades.
After a while you will develop a feel which will give you more confidence as you become familiar with the foreign exchange basics.
With these in perspective, welcome to the world of forex !
Being able to understand what influences a currency movement and correctly predict a movement in one direction or another is what makes a successful forex trader. Let us look at the major influences :
1. Current Affairs
Be aware of the current affairs around the world especially within the major world economies. like USA, United Kingdom etc Monitor national and international news channels for such events as political unrest, social disorder and in particular financial news and major announcement by world leaders and financial leaders like Bernanke etc.
2. Unpredictable Events
A major natural disaster or significant terrorist activity can influence a sudden currency movement. You should always protect your trades from unpredictable events by using stop losses to minimize the affect of a sudden adverse currency movement.
3. Predictable Events
A political event such as a general election is predictable. A major international sporting event such the Olympic Games is predictable. The important thing here is to be able to understand which currencies are likely to be affected and in which direction they will move. It's not just the events themselves which may influence a currency movement but also the announcement of such an event. So be aware of the timing of such announcements.
4. Financial Reports
Be familiar with the timing of monthly financial reporting from countries of influence like USA . Announcements by world leaders concerning GDP, interest rates, inflation etc., will often influence currency movements. Monitor the financial results for the major international companies, particularly the banks and other major international financial institutions.
5. Rumors
It's difficult to avoid rumors but you should be very careful if making a trade based on a rumor because very often a rumor is simply no more than just a rumor and often a rumor is spread to fool traders into thinking the market will move one way when in fact the opposite happens.
6. Currency Pairs
You should pay particular attention to applying foreign exchange basics in the two countries concerned with your currency pairs. It is a fact that the US dollar has the strongest influence on other currencies particularly if one of the pair is a minor currency.
The problem for any beginner in forex trading is how to apply all this fundamental analysis to successful trading. The best advice I can give is to gain experience with fundamental analysis and how each type of influence effects currency movement before you use it to make real trades.
After a while you will develop a feel which will give you more confidence as you become familiar with the foreign exchange basics.
With these in perspective, welcome to the world of forex !
