Global Forex Trading And Very Important Factors

The Forex Market has 46 currency pairs on a conservative estimate. Telling you that you would need to keep an eye on developments on all the countries of the globe would be asking too much of you. For starters, you could keep an eye on developments of the countries whose currencies who have invested in the Forex Market. Look for economic and political developments that could create a stir in the forex market.

Why monitoring the political and economic scenarios of countries are important to global Forex trading?

As it has been observed statistically, the value of currency of a country changes a lot due to the economic and political climate of the country. For example, the Federal Rate cuts on Interest rates aimed at controlling the sub-prime crisis in USA increased the value of the US Dollar. Don't get carried away of you get a cue from one such indicator. Please make a list of all such factors that would impact a currency in the Forex Trading Market.

A long pending factor to a currency movement is the price of crude oil per barrel. As the price of crude oil inches towards $100 per barrel, the US Dollar is inching towards new lows by the day. In such a scenario, you would think that the US Dollar could be undermined severely.

The sentiments of traders across the globe should also be considered

It is important that you stay updated with other traders of the forex market too. At the end of the day, traders and the developments in a country impact the pricing of a currency at 50:50 ratio. A classic example of this is the rebound of US Dollar. It has been observed that the Dollar has hit new lows almost every other day of the trading. Last week, a lot of people realized that the Dollar has much more potential than what it shows. This triggered widespread buying of the Dollar.

How would all this impact you as a trader?

Let's take the example of EUR/USD. Let us assume that you had bought some USD two months ago when it was getting battered. Now with the correction taking place, you are more or less in a position to decide if you wish to stay in the market or exit booking your profits. The correction trend is expected to continue to till the new year after which the forecast for the Dollar looks a bit bleak.

Ideally, a smart trader would book his profits partly on the resounding correction of the US Dollar. He would keep a part of the money invested in the market to see how the Dollar behaves. The point being made here is that your eye on the economic developments of the country could be the best indicator for you to analyze your buy and sell points in the trade.

Which factors to be considered in forex trading?

Growth, Inflation, Crude Oil Prices - are three important factors in no order of priority would need to be taken into count when you make a sell or a buy call in a currency. Please note that there is no direct correlation between these three but all these impact the movement of a currency.

Successful Forex trading is about how you look at the developments of a country. Taking macro and micro economic factors into consideration will make you a smart trader instead of a speculative trader. As it goes, the speculative trader may make a lot of money but will also lose a lot of money.