Factors That Affect the Forex Markets in the Short Term
There are two types of forex traders. One type of traders depends on fundamental analysis in trading forex. The second type of traders depends on technical analysis in trading forex. Whether you are a fundamental trader or a technical trader, you should not underestimate the importance of economic data in shaping trading strategies.
Over 90 percent of currency transactions are done against USD. USD is either the base currency or the counter currency in most of the currency trades.
For success in forex trading, choice of the right currency pair to trade is very important. US Dollar is the most important currency and most probably you will be also trading US Dollar as a forex trader most of the time. You should know that the release of certain economic data has significant and lasting impact on US Dollar.
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.
EURUSD is the most liquid pair in currency markets. The release of Nonfarm Payrolls (NFP) data on the first Friday of every month makes this pair and other pairs involving USD highly volatile.
Similarly, the release of US housing sales number every month has become very significant for USD in the recent years. Previously, forex markets used to give more importance to US Trade Balance.
If you depend on range trading as a trading strategy, you should avoid the day NFP data is released for trading. This is a highly volatile and jittery day for the forex market.
However, if you are a breakout trader, the knowledge of which economic data is expected to be released can help you in determining the size and confidence of the trade.
In brief, knowledge that certain economic indicators make the forex markets move most is important for you as a trader. It is also important for you to know that particular economic data, the market considers most important at any point in time.
Knowledge of which economic data causes knee jerk reaction in the currency markets and which economic data usually has lasting reaction in the currency markets is also important for your trading success. - 23210
Over 90 percent of currency transactions are done against USD. USD is either the base currency or the counter currency in most of the currency trades.
For success in forex trading, choice of the right currency pair to trade is very important. US Dollar is the most important currency and most probably you will be also trading US Dollar as a forex trader most of the time. You should know that the release of certain economic data has significant and lasting impact on US Dollar.
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.
EURUSD is the most liquid pair in currency markets. The release of Nonfarm Payrolls (NFP) data on the first Friday of every month makes this pair and other pairs involving USD highly volatile.
Similarly, the release of US housing sales number every month has become very significant for USD in the recent years. Previously, forex markets used to give more importance to US Trade Balance.
If you depend on range trading as a trading strategy, you should avoid the day NFP data is released for trading. This is a highly volatile and jittery day for the forex market.
However, if you are a breakout trader, the knowledge of which economic data is expected to be released can help you in determining the size and confidence of the trade.
In brief, knowledge that certain economic indicators make the forex markets move most is important for you as a trader. It is also important for you to know that particular economic data, the market considers most important at any point in time.
Knowledge of which economic data causes knee jerk reaction in the currency markets and which economic data usually has lasting reaction in the currency markets is also important for your trading success. - 23210
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 @ 3:12 AM
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