It is often said that information is the basis of profitable Forex trading but, despite the fact that accurate and up-to-date information is indeed essential for currency trading, it is the examination of this information that is the true secret. There are currently two main types of analysis which are used in Forex trading � fundamental and technical analysis - and in this short article we are going to look at precisely what is meant by fundamental analysis.
At its simplest, fundamental analysis looks at both economic and political conditions that might affect currency prices and Forex traders who use fundamental analysis rely on news reports for information on a whole range of things including growth rates, inflation, economic policy and employment rates.
In essence, fundamental analysis gives an overview of currency movements together with a broad view of economic conditions that may well affect the value of a specific currency. With this view in mind, foreign currency traders will then generally move on to use technical analysis to plot entry and exit points into the market and to supplement the information gained through fundamental analysis.
The Forex market is much like any other market and is governed to a large degree by the forces of supply and demand, which are also affected by economic conditions. Two of the most important economic factors that affect supply and demand are interest rates and the strength of the economy and the strength of the economy is affected by foreign investment, the gross domestic product (GDP) and the economy's trade balance.
A whole variety of economic indicators are released by governments and other sources and are usually considered to be reliable measures of economic health that are followed by all sectors of the investment market. Nearly all economic indicators are released monthly but some are released more often and normally weekly.
Two of the key fundamental indicators are international trade figures and interest rates, but other particularly useful indicators include the consumer price index (CPI), producer price index (PPI), purchasing manager's index (PMI), durable goods orders and retail sales.
Interest rates are a very important indictor because they can have either a strengthening or weakening affect on a particular currency. For instance, high interest rates could attract foreign investment and strengthen the local currency, while stock market investors usually react to rising interest rates by selling because of a belief that higher borrowing costs will have a harmful affect on many companies. Large-scale selling by stock investors can quite often cause a downturn in both the stock market and the national economy.
International forex trading system are also extremely important for the Forex trader. A shortfall on balance of trade, with export levels below import levels, is normally seen to be an unfavorable indicator as money leaving the country to buy foreign goods could well have a devaluing affect on the currency. However, fundamental analysis will also give an indication of the expectations of the market and these will normally dictate whether or not a trade deficit is unfavorable. It might be the case, for instance, that a particular county frequently operates on a trade deficit and that this fact has already been taken into consideration in fixing the price of its currency. Generally, a trade deficit will only affect currency prices where they are higher than the market would ordinarily expect.
Every country has its own particular set of economic indicators (there are presently in the region of twenty-eight major indicators being used in the US) and these strongly influence the financial markets. For this reason, Forex traders have to be conversant with them and examine them with great care when preparing their trading strategies.
Luckily, for those traders working on the Internet, many sites today provide an abundance of up-to-date information, but it is up to individual Forex traders to extract this information and apply the principles of fundamental analysis to it in order to formulate their trading decisions.
by www.za77.org
Friday, February 20, 2009
Forex Trading Basics
Forex trading, short for foreign exchange trading, involves the buying and selling of the many currencies of the world. It does not operate via a central exchange site, like traditional stock market trading, and may, thus, fully function a 24-hour basis.
When compared to other exchanges, the trading market is the largest in the world, even beating the New York Stock Exchange (NYSE) by over a hundredfold, in terms of daily trading volume, most of which are conducted by private entities and individuals.
Because of the absence of a central exchange, trading happens between two parties directly. Buyers and sellers communicate and trade via the phone, the Internet or other communications networks worldwide.
Basic forex training
Forex trading involves the buying and selling of two currencies at the same time. This combination is often dubbed a cross, because it occurs between two moneys; for instance, the US dollar/Japanese Yen. The highest traded currencies in forex are the US dollar, the euro, the Japanese yen and the UK pound - the "majors".
Trading normally occurs in the spot market, which is the largest because of its volume. Here, trades are made and completed directly and on the spot. You don't have to wait too long to settle.
Advantages of forex trading
1. No 4pm trade closing time.
When you're trading forex, you have 24-hours to do so from Sunday night to Friday night. This opportunity allows you to retract your moves and react immediately when a currency suddenly goes up or down. Breaking news are vital to trading.
2. Very liquid.
It is easy to convert your trades to cash in the market, especially if yours involves one of the majors. The high liquidity helps ensure that spreads are narrow and prices are stable throughout the period.
3. Strong potential for profits
This is particularly true with falling currencies. Because trading involves two currencies, when one rises, the other naturally falls. When a currency depreciates, it could be the perfect time to buy into it so that you can sell it for a hefty profit when it's its turn to appreciate.
4. The higher the currency's liquidity level, the cheaper it is to trade it.
This is why most forex trading patrons opt to trade majors, because they have the highest liquidity. In addition, trading is also more attractive to some money movers because of the absence of a commission. Thus, currencies are actually traded for their real merits and not because they come with misleading incentives.
There's a lot more to learn about trading and the above merely scratches the surface. To be able to further understand what a forex trading system is, you need speak to an expert who more likely has all the answers to your questions. Or, yet, ask somebody who's already had experience with forex trading.
When compared to other exchanges, the trading market is the largest in the world, even beating the New York Stock Exchange (NYSE) by over a hundredfold, in terms of daily trading volume, most of which are conducted by private entities and individuals.
Because of the absence of a central exchange, trading happens between two parties directly. Buyers and sellers communicate and trade via the phone, the Internet or other communications networks worldwide.
Basic forex training
Forex trading involves the buying and selling of two currencies at the same time. This combination is often dubbed a cross, because it occurs between two moneys; for instance, the US dollar/Japanese Yen. The highest traded currencies in forex are the US dollar, the euro, the Japanese yen and the UK pound - the "majors".
Trading normally occurs in the spot market, which is the largest because of its volume. Here, trades are made and completed directly and on the spot. You don't have to wait too long to settle.
Advantages of forex trading
1. No 4pm trade closing time.
When you're trading forex, you have 24-hours to do so from Sunday night to Friday night. This opportunity allows you to retract your moves and react immediately when a currency suddenly goes up or down. Breaking news are vital to trading.
2. Very liquid.
It is easy to convert your trades to cash in the market, especially if yours involves one of the majors. The high liquidity helps ensure that spreads are narrow and prices are stable throughout the period.
3. Strong potential for profits
This is particularly true with falling currencies. Because trading involves two currencies, when one rises, the other naturally falls. When a currency depreciates, it could be the perfect time to buy into it so that you can sell it for a hefty profit when it's its turn to appreciate.
4. The higher the currency's liquidity level, the cheaper it is to trade it.
This is why most forex trading patrons opt to trade majors, because they have the highest liquidity. In addition, trading is also more attractive to some money movers because of the absence of a commission. Thus, currencies are actually traded for their real merits and not because they come with misleading incentives.
There's a lot more to learn about trading and the above merely scratches the surface. To be able to further understand what a forex trading system is, you need speak to an expert who more likely has all the answers to your questions. Or, yet, ask somebody who's already had experience with forex trading.
Thursday, February 12, 2009
Free Forex Books: Analisa Forex 5
Hey you got good forex contents. Shall we exchange links with my blog at Forex Trading Tips?
4 Forex Trading Techniques In Creating Forex Trading Systems
There are some stuffs that we want to accomplish when we create some forex trading systems, we need the indicators to tell us the entry points as early as the trend occurs, find the maximizing profits exit points and to avoid choppy markets or whipsaws. Below are the 4 forex trading techniques that can lead to your success.
#1. Choosing The Trading Timeframe. How many hours are you willing to contribute to trading? Would you prefer to sit in front of your computer for several hours trading short time frames (5, 15, 30 minutes) that would require constant monitoring of the market or would you be more comfortable to monitor your charts just once or twice a day? One of the forex trading tips is you may want to test your forex strategy and find out its performance in different time frames, then choose the most accurate and profitable option.
#2. Choosing Trading Indicators. There are such forex indicators like Exponential Moving Average, Simple Moving Average, Parabolic SAR, MACD, Stochastic, MACD etc. You need to fully understand the principles of their activities in order to be able to take maximum advantage of the trading signals that they produce.
#3. Choosing The Right Currency Pair. Currencies pairs have their own unique behaviour. Some are extremely active like GBP/USD or GBP/JPY, but some are quite consistent and steady trending like EUR/USD or AUD/USD.#4. Choosing Other Forex Trading Signals To Confirm. Once we found the trading time frame, indicators and currency pairs that respond the best it is time for the most crucial step. Other good forex indicators/tools to confirm the signals are RSI, Stochastic, Fibonacci etc. You will need all those if you want to learn how to trade forex successfully.
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