In the ever-changing world of finance, you have to keep your eye on the recent trends to be successful. If you talk to anyone more or less familiar with the Forex market, they will tell that the main success factor for them is the ability to predict the Forex market’s development.
What is Forex?
Simply put, the Forex market is a worldwide decentralized market that allows people to trade different currencies. Notably, at the moment, that is by far the largest market in the world, which processes trillions of dollars worth of transactions every single day. Among key participants and members of the market, we can name international banks, hedge funds, central banks, commercial companies, and, of course, Forex brokers, investors, and traders.
Forex trading tips
1. Watch out for trends on the market
Nowadays, it is quite common to hear many professional traders and brokers saying that it is better to go against the trend in order to succeed. But the truth is that even in 2020, trend trading is the most reliable way to go. Moreover, trading against trends will most probably result in great losses rather than gains.
2. Get into mobile trading
Mobile trading has made life easier for traders and investors nowadays. Thanks to it, they don’t have to sit in front of their computers 24/7.
Still, wondering what mobile trading is? It is quite simple – this is just the ability to trade the Forex market using the smartphone or tablet. That allows many people to trade without sacrificing their work, family or friends.
3. Don’t trade the news
That is a common thing to trade just before, during, or right after certain news was released. Today, the majority of experienced traders already know that it is way wiser to do that once the dust has settled, meaning that you need to allow the price action to tell you whether the news resulted in the market being bullish or bearish.
4. Always start trading with a demo account
Forex market and risk go together hand in hand. Even if you feel very confident and think that you know it all, it is always better to try trading with a demo account first. There are no certain obligations or spendings associated with demo accounts provided by the majority of Forex brokers. But at the same time, you can learn and check which currency pairs and trading strategies work for you the most.
Factors influencing the Forex market
Furthermore, if you want to be truly successful in the current Forex market, you have to understand the factors shaping it and that can affect the movement of the currency’s exchange rate. The five such factors are:
- Political and geopolitical stability of the country
- The economic growth rate of the country
- The monetary policy adopted by the central bank of the country
- Interest rates imposed by the central bank of the country
- Imports and exports made
Only after fully analyzing micro and macro trends of the market, you can successfully predict the moves of the Forex market in the future. However, you need to understand that this is not as easy as it might sound, you need to utilize many tools and follow the news constantly to be able to do that.
Types of the Forex market analysis
What is more, there are many different ways to analyze the Forex market. Each of those has its own advantages and drawbacks, as well as purposes and characteristics. And yet, in this article, we will focus only on two main areas of Forex analysis: fundamental and technical analysis.
Fundamental Forex analysis
Among parts of the fundamental analysis, you need to pay precise attention to are the gross domestic product (GDP), inflation, economic growth activity, and manufacturing. Therefore, it is fair to state that when it comes to fundamental analysis of the Forex market, it is mostly about the economic strengths of the particular country, as well as political and economical events that influence the market there. Namely, updates or huge news delivered by politicians can have a great impact on the exchange rate of the currency and, therefore, its volatility.
There are several economic figures you need to keep an eye on constantly:
- Interest rates
- Situation of employment
- Budget, trade balance and treasury budget
Technical Forex analysis
The essence of this type of Forex market analysis is that it forecasts price movement on the Forex market through an examination of past market data, particularly price data. The idea behind it is that history has a tendency to repeat, meaning that economic trends that had an impact on the Forex market in the past can take place again.
Hence, technical analysts are mostly convinced that price fluctuations are not random and can indeed be predicted. Once a certain trend is established, it is likely to spread across a particular period of time.