Trading CFDs carries considerable risk of capital loss. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
April 13, 2018
What really drives the forex market? This is a question that is difficult to answer especially due to the complexity of the forex market and all the variables that influence the quotations of a currency.
We believe it could be useful to understand the strengths that move the currency market and also to give an answer to the classic question “how to trade on the forex market”.
The premise of a trade is an intense educational activity also based on learning the variables that can influence the success (or the failure) of the trade.
We believe that, in order to satisfy the aim of understanding the market, it may be useful, more than any intensive training on the forex, to study this chart extracted from a Bloomberg & Rosenberg study of 1996 entitled "Currency Forecasting".
To get to the end of the flow chart, the trade on the market, there are many factors to consider. If we are long-term investors then we will try to deepen the analysis of the long term factors, if instead we are used to trading in the short term, we will focus on short term factors.
It is evident that the amount of information to be reprocessed is so high that it makes daily trading operations based on these factors practically impossible; for this reason the technical analysis effectively reduces all these elements to a concept of statistical frequency linked to price movements.
However, the importance and weight of some factors cannot be neglected in a trading activity. It is obvious that for a currency with a high trade deficit, the timing of macroeconomic data and in particular those related to exports and imports cannot be ignored.
Another example: a country with rising inflation will be affected by this dynamic monetary policy and in this case it will be appropriate to take into due consideration the dates (and subsequent statements) of the meetings of the central bank of that country.
As in the first case, a difficulty on the export data will confirm a competitive currency devaluation policy like the one adopted in the past by Japan, for example. In the following example an increase in interest rates could represent a factor capable of strengthening the currency under analysis.
One more example. The weekly data provided by the Cot Report elaborated by the CFTC must be carefully analysed for forex trading, since with these numbers it is possible to bring out excesses of positive or negative sentiment on a specific currency. Very often these excesses can be exploited in a contrarian optic to make profitable operations. This consideration is linked to the fact that when the speculators are all oriented in one direction, an unforeseen event is enough to violently reverse the trend.
In conclusion, in order to answer the initial question “What really drives the forex market?”, we can confirm that you will need a lot of study, preparation, flexibility and the ability to select the right information. A successful trader should never be distracted by easy gains of automated tools (such as forex robots), but instead he should concentrate on creating a trading system taking into account the surrounding environment.
May 15, 2018
The volatility of the forex world is one of those factors that attract a huge number of beginner and professional traders.
April 02, 2018
At the beginning of April, we can expect a rise in rates of the Fed, in a very uncertain market moment, especially on the stock market.
March 01, 2018
A list of important events that can move the markets in March...
February 18, 2018
For those trading on forex it is essential to understand all the signals that the market offers daily. Technical analysis tools help the trader understand who is dominating the market: bulls or bears.
February 05, 2018
There are no appointments in the month of February with the two most important central banks in the world, ECB and FED.
January 20, 2018
Good traders always use a stoploss when they open a new trade. You can use a regular stop, but you can also use a trailing stop.
January 02, 2018
Last year closed with important performances that were not seen for a while, especially concerning Euro and Dollar.
December 18, 2017
Among the most relevant macroeconomic data for forex traders, inflation must absolutely be included, or even better all the data on production price trends (PPI) and consumption (CPI).
December 01, 2017
December is crucial for the currency market, but not just because of the important meeting of the Federal Reserve scheduled for the 13th.
November 21, 2017
Forex trading can create significant error margins and for this reason the combination of money management, continuous training and common sense is crucial to get the success you want.
November 02, 2017
November starts with the Federal Reserve meeting that should lead to the rise of rates in the month of December.
October 21, 2017
The Forex market allows each trader to operate not only on major currencies like EurUsd, UsdJpy or GbpUsd (the so-called majors), but also on the so-called exotic cross currencies.
October 04, 2017
The month of October is dense with appointments, especially with reference to the news that might come from Central Banks.
June 30, 2017
As always, the month of July represents the antechamber to the month of August, a usually volatile month for financial markets due to the low amount of trades and lower presence of institutional transactions.
May 21, 2016
What are the benefits of trading CFDs over traditional forms of trading?