Category: forex

Gross Domestic Product (GDP) Gross Domestic Product is one of the major economic indicators that generally reflect the state of the economy of the whole country. GDP measures an economy’s total expenditure on newly produced goods and services and the total income earned from the production of these goods and services. In particular, the GDP…

Inflation’s Impact on an Economy Inflation measures at what rate prices in an economy are rising. Inflation is tied directly to the purchasing power of a currency within its borders and affects its standing on the international markets. Prices of goods, houses, labor, production materials, etc., are all closely monitored to see if their prices…

Employment indicators reflect the overall health of an economy or business cycle. In order to understand how an economy is functioning, it is important to know how many jobs are being created, what percentage of the work force is actively working, and how many new people are claiming unemployment. We have already mentioned, on the…

The technical trader is concerned with studying patterns of price movement on the chart in order to predict the direction of current and future trends in the Forex market. The decision to buy, sell, or hedge a current position – or to stay out of the market entirely – is made upon this analysis. Identify…

One should consider the risk involved in trading on the forex market. The trader is free to decide whether to take a conservative or a risk-taking approach in making trades. Conservative trading means placing fewer trades over longer periods, with smaller lot sizes, strict risk management, and modest profit targets. One may use limit and…

Prices of goods, commodities and exchange rates are determined on open markets under the control of two forces, supply and demand. The laws of supply and demand show that: The value of a nation’s currency, under a floating exchange rate, is determined by the interaction of supply and demand. We will work through some charts…

A variety of actors cause currencies to experience changes in supply and demand: Who Comprises the Forex market? Due to its vast volume and large number of participants, no individual or single company has complete control over which way the market will sway. Historically, Forex has been dominated by commercial banks, money portfolio managers, money…

Floating vs. Fixed Exchange Rates There are two types of exchange rate systems: floating or fixed. A floating exchange rate is one in which a currency’s value is determined by market forces. A fixed exchange rate matches, “pegs”, the value of the currency to: one currency, several currencies or even to a fixed amount of…

Interest rates play the most important role in moving the prices of currencies in the foreign exchange market. As the institutions that set interest rates, central banks are therefore the most influential actors. Interest rates dictate flows of investment. Since currencies are the representations of a country’s economy, differences in interest rates affect the relative…

Central Banks Set Interest Rates Since central banks, also known as reserve banks, play the crucial role of setting interest rates they need to be followed and studied by a fundamental (and even technical) Forex trader. Central banks want to achieve financial stability of their currency (i.e. battle inflation) and maintain overall economic growth in…