The foreign exchange market is a relatively dynamic financial market; it is also quick and in a state of continuous flux. Millions of individual and professional foreign exchange traders come together on the Foreign exchange market making it a unique and one of the most liquid financial markets in the world. The fluctuations that take place at every moment on the foreign exchange currency prices are simply the result of certain factors which affect the market. It is essential for a trader who wishes to earn money in this market to consider these factors and to understand in order to know when it must position itself and then exit the market. Below are the factors that impact this market and the prices of the currencies that compose it.
- The economy
The foreign exchange market is influenced by economic circumstances that occur in a country at a certain time. The monetary policy of a country in general will affect the rate of the local currency, other factors including production, international trade, employment or even the economic health of a country (its GDP) will also have their effect on the price of a currency. These factors are published in the form of statistics in the foreign exchange economic calendar and are very influential on the currencies concerned. Trading according to the economic calendar is a practice called “fundamental trading”. When choosing your usgfx.com meta trader 4 forex, make sure he is familiar with all of these economic factors.
Political circumstances are also important to consider when trading Foreign exchange. If for example you are in the habit of speculating on the course of the EUR / USD currency pair then it is interesting for you to keep abreast of political news from the European Union and the United States, such as for example of their elections which often have a direct impact on the value of the local currency and therefore on your trading.
Other factors, particularly psychological factors affect the foreign exchange market. For example, there is a lot of turmoil on the foreign exchange market when international traders have the same feeling towards a market; this is verified with gold, considered as a safe haven. Note also that technical analysis and fundamental analysis also affect the psychology of traders. During a fundamental analysis some published economic statistics can push the market massively in one part or the other of the graph, in graphical analysis the levels round prices (ending with “00”) also play an important psychological role.