Key Economic Factors.
Home page of BNFX. A Free Micro Trading Course, A premium Trading Course, Forex Trading Signals using Trade Copier and Free access to a Live Trading Room with one of THE myfxbook verified profitable traders in the World to personally deliver all FX. The Fundamentals Of Forex Fundamentals. Justin Kuepper. Those trading in the foreign-exchange market (forex) rely on the same two basic forms of analysis that are used in .
Conversely, if the euro goes down with respect to the dollar, you could lose your entire deposit, or even more. Some things to consider before trading forex:. Control a large investment with a relatively small amount of money. Forex is a very active market with an extraordinary amount of trading, especially in the biggest currencies.
Trading some of the more obscure pairs may present liquidity concerns. Forex trading doesn't usually require payment of an exchange or license fee, but you will be required to deposit margin for the position. The Standard account can either be an individual or joint account. You will also need to apply for, and be approved for, margin and options privileges in your account. This feature-packed trading platform lets you monitor the forex markets, plan your strategy, and implement it in one convenient, easy-to-use, and integrated place.
One of the unique features of thinkorswim is custom forex pairing. Please ensure that you are fully aware of the risks involved and, if necessary, seek independent financial advice. The educational content on Tradimo is presented for educational purposes only and does not constitute financial advice.
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Fundamental Analysis in the stock market involves analyzing the inputs of a company in an effort to forecast future growth potential. For an individual company, this can be a very logical way to look for investment ideas. Due to the nature of the market, many traders refer to technical analysis, and we showed you how fundamental data events can be traded with technical analysis in the article The Potent Combination of Fundamentals and Price Action.
Currency prices matter because of cross-border trade. In the article, we saw how the nation of Japan was absolutely ravaged by a strong yen ; as a stronger yen meant lower profits and margins for Japanese exporters. The concept of Fundamental Analysis in the Forex Market can be all boiled down to one simple data point: If interest rates move higher, investors have a greater incentive to invest their capital; and if interest rates move lower, that incentive is lessened.
This relationship is at the heart and soul of macroeconomics; and this is what allows Central Bankers to have tools to steward their respective economies. The decision to increase or decrease rates can bring impact to other economies as well.
After having little incentive and extremely low rates for a long time, you notice that The United Kingdom increases rates 25 basis points. This increase in interest rates from the Bank of England can and should bring higher rates in other issues from The United Kingdom; so you may not necessarily buy Gilts or a government bond, but investors can now look to invest in England to get that higher rate of return.
Additional investors thinking the same thing rush into UK bonds, and eventually — the price of the British Pound will go up to reflect this additional demand.
A great example of this was in Australia from leading up to the Financial Collapse; as insatiable demand from China drove growth throughout Australia, unemployment got very low and inflation moved very high. The Aussie more than doubled while RBA moved rates from 4.
This is an interest rate cycle, and it drives capital flows that are at the heart of the FX market. It all goes back to the incentive to invest. If Central Bankers want to slow down their economy, they look to raise rates. If they want to encourage more growth within an economy, they look to decrease rates. The first and most obvious impact is the incentive to invest. The second impact is what this does for capital expenditures. If rates decrease, the attractiveness of locking up a long-term loan at the new lower rate is much higher than it was previously.
The incentive to buy big-ticket items like homes, and cars is now higher. And when you buy a home or a car, the homebuilder or car maker has to turn around to pay for their materials and workers. If the lower rates increase the number of homes or cars that are being purchased, this amounts to growth.
Homebuilders and car makers will eventually have to hire new workers to keep up with the demand; and as demand for workers increases, so will the wages that are needed to attract qualified candidates.
Prices can continue inflating, and if left unchecked — could bring hyperinflation. Imagine going to the store to buy a gallon of milk and seeing the price at 27 dollars. Then my mind would wander to other areas where costs might be increasing.
You will find the highest [ The thought behind this statistic is that if producers are seeing growth, then that growth will eventually cycle through to consumers; after all, if someone wants to buy a good, it has to be produced in the first place, right?
A list of key economic factors that are routinely covered in the current news and which can move the market when they are released includes the following:.