When central banks announce any changes in interest rates, forex market experiences volatile price movement. Gross Domestic Product GDP GDP is an important part of a country's economy which describes the total market value of all goods and services produced by a country during in a specific year.
Significant changes in GDP can cause a currency to get stronger or weaker with another currency in the Forex market and GDP release also makes them volatile. It signifies the changes in the level of retail prices for the fundamental consumer market. Inflation is directly related to the purchasing power of a currency within its limits and affects its position on the international currency markets. When the economy grows in usual conditions, the increase in CPI can lead to an increase in normal interest rates which cause an increase in the prettiness of a currency.
Employment Indicators Employment pointer replicates the overall strength of an economy or business condition. In order to identify how an economy is running, it is essential to know how many jobs are being created or destructed, what percentage of the workforce is actively working, and how many people are claiming unemployment.
The growing speed of people's income in a country is also important to measure the inflation. Retail Sales The retail sales are released on a monthly basis and are important to the forex trader because it shows the overall power of consumer spending and the achievement of retail supplies.
Forex trading strategies should always take this factor in consideration. Consumer actions need to be observed carefully, in order to make the most out of Forex markets. The retail report is especially valuable because it is a particular factor of extensive consumer spending model that is adjusted for regular variables.
Traders can use it to evaluate the instant path of an economy. Balance of Payments The Balance of Payments shows the ratio among the number of payments received from abroad and the number of payments going to abroad. In details, it shows the total foreign trade operations, trade balance, and balance between export and import, and transfer of payments. If incoming payment exceeds the outgoing payments the balance of payments is positive.
The surplus is a positive factor for the growth of a currency. Fiscal and Monetary Policy Stabilization of the economy e. Fiscal policy relates to taxes and expenditures, monetary policy to financial markets and the supply of credit, money, and other financial possessions.
Besides these economic indicators, there are social factors and government policies that are also fundamental indicators which help forex traders to find out the market movements and trends. You can find this indicators release on our economic calendar page. You can also find the time and date with effect about fundamental indicator on our Economic Calendar page Technical Analysis Trends speak volumes in foreign exchange.
The process of devising Forex trading strategies becomes simpler when you can make decisions based on trends. Technical Analysis is based on knowledge about price movements, volumes and price action of past behavior of the markets. It is a technique used to forecast the future direction of the market. A graphical chart is used to analyze the market technically. Each trader has different personality traits which need to be taken into account when choosing the best Forex trading strategy.
Some traders like fast-paced trading on short timeframes, while others prefer longer-term trades which are held open for a few days or weeks. Whether you want to buy a Forex strategy or use a free Forex strategy, your personality plays an important role. There are four main trading styles that you need to be aware of: Scalping Swing trading Position trading Scalping is the fastest trading style, and sometimes involves holding trades for just a few seconds.
Scalpers usually open dozens of trades during the day, and aim to profit on very small price movements, often closing the trade with only a few pips of profit. This is a fast-paced trading style, and not suitable for everyone. In terms of trading strategies, scalpers rely on short-term technical analysis and news trading and try to profit on sudden spikes in momentum. Day traders hold their trades during the day, and close them by the end of the trading day. Just like scalpers, day traders rely on technical analysis on relatively short timeframes, ranging from 15 minutes to up to one hour.
Swing traders hold their trades for a few days or weeks. Unlike day traders, swing traders are exposed to increased risk if the market conditions change overnight or over the weekend. However, the longer time horizon allows swing traders to have larger profit targets than day traders.
A successful Forex strategy for a swing trader would be based on technical levels combined with some fundamentals. Finally, position traders are very long-term traders, holding their trades for a few months in some cases.
This calls for a deep analysis of market fundamentals, since fundamentals have a significant impact on long-term currency movements. All successful Forex trading strategies take into account these differences in trading styles, so you need to determine first which style reflects your personality, and then choose the strategy that best fits your approach. Technical vs. One of the most interesting questions is whether a trading strategy should be based on technicals or fundamentals.
While there is a furious debate among Forex traders regarding which one is better, there is no single answer to that. Technical Forex market strategies rely on the analysis of price charts and historic price data and are based on the three basic tenets of technical analysis, which state that 1 price discounts all information, 2 markets like to trend, and 3 history repeats itself.
The beautiful thing about technical trading strategies is that they can be used on any time frame, from 5 minutes to up to a month. Furthermore, technical analysis has proven its ability to generate consistent returns, given the trader analyses the market in the correct way. Unlike fundamentals, technical analysis also provides clear entry and exit points, which is a very important benefit of this type of analysis. Fundamental Forex trading techniques, on the other hand, aim to analyse the underlying fundamentals of a currency.
Those include changes in monetary policies, economic growth, unemployment and inflation rates, and interest rates, all the way to relative productivity and purchasing power parities among countries. Fundamental analysis is usually a tick more complicated than technical analysis , since traders need to know how to properly analyse various news sources and filter out the important events from the unimportant ones.
Fundamentals work best in the long-term, and need also to be analysed by swing traders who hold their trades for a few days to a few weeks. Even day traders understand the importance of fundamentals when important news releases move the market hundreds of pips in a few hours.
Trend-following Forex trading methods All financial markets like to trend.
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