Cause and effect is the basis of
all currency trading. Currency exchange
is supply and demand; fundamental analysis that examines economic factors can
help determine supply and demand. You
could spend years even decades learning all there is to know about Forex
trading. You can apprentice “all knowing
traders” dump money into technical systems, apps, and lessons. The best education is experience, if by
chance (you will), you do come across the “all knowing trader” run the other
way. A good trader is a humble one; they
have made bad calls and lost a lot and also made great moves and gained. A humble trader will have more respect for
the Forex market, including the individuals that follow their own way and want
to learn all they can. The Forex market
is a combination of corporate and private traders using different strategies,
looking at different pieces of data that sway their moves. With more than eight major currencies and at
least seventeen derivatives available for trading at any given time, finding
the right information that will work for your strategy is key. More than seven pieces of vital information
is released daily, regarding the eight major currencies. This information can be about the
country’s inflation, deflation, trade
balance, payroll, production, sales, or banks.
Specific information can be much more important and move the market
causing high, medium, or low volatility.
We can download many different types of economic calendars that
highlight all of these aspects even what the rate the volatility will be upon
the reports release. Timing is also
another thing to consider. The time when
the information is released in another country can create a trend quickly
causing momentum unable to sustain even the right moves. Even if you do your research, the risk of
reversal is high due to the volatility.
U.S.
economic releases are looked at the most since the USD is involved with 90% of
all trades. Unfortunately, the United States focuses on corruption everywhere
but America. The correction in the reports will
come regardless of what they report now.
If you are not one of the sheep believing that the economic data reports
are accurate, you can predict what the outcome of those reports will be.The real indicator is price.You can listen to the rumors or buy and sell
fact. Focusing on too much on news,
propaganda, and fundamentals can damage your performance.The major players are not concerned with the
facts or reports based on what they want to happen.
It is important to
watch how the market is moving and just what information is making an impact. What factors move the market? I mentioned
before Fundamental analysis, the study of economic factors that influence the Forex market. Technical analysis on the other hand predicts patterns,
studying price levels, volume, and then forecasting the pair and what direction
they will move. Information is the key,
and your own knowledge is truly power you have. Unfortunately, the United
States focuses on corruption everywhere but America.If you are not one of the sheep believing
that the economic data reports are accurate, you can predict what the outcome
of those reports will be. If you are one
or know one of the major players on Wall Street you may be able to gain your
own what they call a “Whisper Number” this number is the earnings per share
(EPS) unpublished and unreleased forecast.
These numbers are much more regulated and confidential now days. However, major corporations and the extremely
wealthy still get tips here and there.
You can also generate your very own Whisper Number, just by your own
research, information, company financials, and market trends. You can even use instinct or gut feelings
when it differs from the consensus forecast you can set your trades appropriately
to gain an edge. Forex trading is not
based on logic, it is primary a price action strategy, gauging the directional
future of the market. You should
definitely incorporate all the information given to position yourself
correctly.
A study on just how long information from the
news affects the market was done by Martin D. D. Evans and Richard K. Lyons in
2004. It showed that it takes hours if
not days to absorb the effect on returns and order flow, it generally occurs in
the first or second day and really pronounced by the third day lingering till
the forth day. This study was also done
in 2004. Technological advancements and instant
data are much more accessible. You can
see the effect happen quickly looking at the volatility. Volatility is crucial to understanding the way
the market moves. How much a pair moves
by the minute, hourly, daily, and long volatility vary drastically? Monitoring the volatility is constant, and
can tell you how you should be trading.
Volatility is much more useful when measured by the fundamental and
technical analysis. Conditional bias will happen, politics, and other elements will throw off any predictions they
have. Developing your own strategy is
the key to achieve or sustain profitable trades.
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