Factors That Affect the Forex Markets in the Short Term
There are two trading strategies. One strategy depends on fundamental analysis in trading forex. The second strategy depends on technical analysis in trading forex. Whether you use fundamental analysis or a technical analysis as a trading strategy, you should understand the importance of economic data in shaping trading strategies.
USD is the most important currency in the world. 90% of currency transactions are done in USD. In almost most of the currency trades, USD is either the base currency or the counter currency.
Choosing the right currency pair to trade is very important for you. USD is the most important currency and most probably you will be also trading USD most of the time. You should know that the release of certain economic data has significant and lasting impact on USD.
You should know as a forex trader that currency markets reaction to the release of different economic data with time also changes. Some years back, US GDP figures used to be important for US Dollar but dont have much impact in recent years.
EUR/USD is the most liquid pair in the forex markets. The release of Nonfarm Payrolls (NFP) on the first Friday of every month is the most volatile day for this pair and other pairs involving USD as a base or counter currency.
Some years back, the release of US housing sales number figure every month was not significant for the currency markets. But these figures have become very significant for US Dollar in the recent years especially after the US housing market crash. Forex markets used to give more weight to US Trade Balance figures in the past but they dont react to these figures much now.
If you are a range trader who likes to scalp for a few pips every trade, you should avoid trading on the day NFP data is released. Release of NFP figures makes the markets jittery and highly volatile.
However, as a breakout trader, understanding of which economic data is expected to be released can help you in your trading. You should plan your trades in accordance with the importance of the economic data to be released.
In nutshell, understanding that some economic indicators move the forex markets most is very important for you as a trader. It is also important for you to know which economic data the market deems most important at any point in time.
You should also understand which economic data causes knee jerk reaction in the currency markets and which pieces of economic data will have lasting reaction in the currency markets. - 23159
USD is the most important currency in the world. 90% of currency transactions are done in USD. In almost most of the currency trades, USD is either the base currency or the counter currency.
Choosing the right currency pair to trade is very important for you. USD is the most important currency and most probably you will be also trading USD most of the time. You should know that the release of certain economic data has significant and lasting impact on USD.
You should know as a forex trader that currency markets reaction to the release of different economic data with time also changes. Some years back, US GDP figures used to be important for US Dollar but dont have much impact in recent years.
EUR/USD is the most liquid pair in the forex markets. The release of Nonfarm Payrolls (NFP) on the first Friday of every month is the most volatile day for this pair and other pairs involving USD as a base or counter currency.
Some years back, the release of US housing sales number figure every month was not significant for the currency markets. But these figures have become very significant for US Dollar in the recent years especially after the US housing market crash. Forex markets used to give more weight to US Trade Balance figures in the past but they dont react to these figures much now.
If you are a range trader who likes to scalp for a few pips every trade, you should avoid trading on the day NFP data is released. Release of NFP figures makes the markets jittery and highly volatile.
However, as a breakout trader, understanding of which economic data is expected to be released can help you in your trading. You should plan your trades in accordance with the importance of the economic data to be released.
In nutshell, understanding that some economic indicators move the forex markets most is very important for you as a trader. It is also important for you to know which economic data the market deems most important at any point in time.
You should also understand which economic data causes knee jerk reaction in the currency markets and which pieces of economic data will have lasting reaction in the currency markets. - 23159
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading; stocks and forex. Read about Trend Forex System. Best Forex Signal Service. Learn Forex Trading.
posted by X - Men @ 2:42 AM
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