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Foreign Exchange Basics: How To Handle Forex News

If you want to make money from the forex market then you will need to know foreign exchange basics. You may have a good mathematical understanding of trends and charts but it is also important to understand the foundation on which the currency trading markets are based. If you do not, you could enter a trade at exactly the wrong time.

The forex market is heavily influenced by national and international news and current affairs. This especially relates to financial news but other major events can have an effect too. These may be expected or unexpected.

For example a disaster such as a major earthquake or terrorist attack is usually unpredictable but could affect currency values. There is not much you can do about this except always to be sure to use stop losses.

A more predictable event would be the announcement that the Olympic Games will be held in a certain country. This could strengthen confidence in that country’s economy and lead to a rise in the value of its currency. At the same time the other major contenders for the Games may suffer a fall in currency values. So it is important for a trader to know when an announcement like that is expected, and which countries are involved.

Similar situations are the financial reports that are released almost daily in many countries. Less regularly, but usually foreseeable, there will also be announcements about interest rates, inflation, gross domestic product and other matters of national economic importance.

Try to avoid trading on rumors. You might see news reports or hear other traders speculating that an announcement will go one way or the other. Do not trade on the basis that they are right. First because they still could be wrong, and second because if it is such a sure thing, the price has probably already changed to take into account the rumors and you will not gain much even if they are right.

Do not forget that you are always trading on two nation’s currencies, not just one. If your own country is one of them, you will have much easier access to financial reports for that currency and it is easy to forget to check on events in the second country. This is particularly true for Americans because dollar news tends to dominate the forex alerts anyway. It is even more true if you are trading the dollar against a minor currency. You may have to take positive steps to ensure that your information is not one-sided.

Even if you are just beginning as a forex trader, it is important to keep in mind these aspects of fundamental analysis for the forex market. Exiting the market before any major announcement is usually the best move for a beginner. As you become more experienced you may develop a system based on this type of forfundamental analysis, but it is important to become familiar with all of the foreign exchange basics first.

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Thursday, July 2nd, 2009 Introduction No Comments

Fx Fundamental Analysis: How The Economy Affects Fx Trading

There are basically two types of currency exchange trading: forex fundamental analysis and technical analysis. There is a lot of debate about which is better. In fact, both are important.

The simplest way of looking at these two methods of analyzing the market is to say that fundamental analysis considers the world economy while technical analysis looks at charts. In this article we will consider the different fundamental or economic factors and how they can affect your trades.

It will be clear to anybody who has even the most rudimentary understanding of the currency markets that a nation’s economic status will have an effect on the value of that nation’s currency. A healthy economy means a strong currency, just as a company’s stocks will rise in value when that company is doing well.

Any time that a major financial or economic report is due from one of the main players in the world economy, you can expect to see an effect on the foreign exchange markets. This includes reports of the country’s Gross Domestic Product, statements of the national debt, inflation, employment levels and trade deficits. Many of these reports are given out regularly at predetermined times and dates, and you will see a lot of volatility in the forex markets around those times.

It is very important to keep track of when these reports are due, not only in your own country but in all of the countries whose currencies you regularly trade. You cannot rely on national newspapers and television for this. They do not carry international economic news at a sufficiently detailed level. You need specialist publications. Many people use the internet for this purpose.

However, it is not only the economy that counts. Social and political forces also have a strong influence on a nation’s currency values. Events such as an election, civil unrest, or a natural disaster can cause fluctuations in values.

Some of these events are difficult or even impossible to predict, but you can still base trades around what is likely to happen after the event. You can use historical analysis to see what happened in the currency markets the last time there was a similar event.

If you want to base your trading around fundamental analysis of the forex markets you will need to be the type of person who enjoys following the financial, political and economic news.

The alternative is to use information about upcoming events to avoid trading at those times. People who prefer to rely mainly on technical analysis will do this. But you still need to know what is happening, in order to keep out of the market. So even for somebody who prefers basing their trades on charts, forex fundamental analysis is important.

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Tuesday, June 23rd, 2009 Economic Conditions No Comments