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.
Since majority of the currency trades involve USD, you as a forex trader will also most probably trade USD most of the time. Release of certain economic data has significant and lasting impact on currencies like 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 market and is heavily traded. The release of Nonfarm Payrolls (NFP) data on the first Friday of each month has become important in recent years. These figures makes EUR/USD and other pairs involving US Dollar highly volatile for some time until the markets digest the importance of these figures.
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.
Range traders like to trade when the currency pair they are trading tends to range. If you are a range trader who wants to scalp for a few pips every time you trade, you should avoid the day NFP data is released for trading. This is a highly volatile day for the markets.
However, if you use breakout trading as your trading strategy, understanding which economic data is expected to be released on a particular day can help you in your trading. You should plan your trading strategy in accordance with the significance of the economic data to be released.
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.
You should also know which data causes knee jerk reaction in the markets and which pieces of data will have lasting reaction in the forex markets. - 23218
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.
Since majority of the currency trades involve USD, you as a forex trader will also most probably trade USD most of the time. Release of certain economic data has significant and lasting impact on currencies like 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 market and is heavily traded. The release of Nonfarm Payrolls (NFP) data on the first Friday of each month has become important in recent years. These figures makes EUR/USD and other pairs involving US Dollar highly volatile for some time until the markets digest the importance of these figures.
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.
Range traders like to trade when the currency pair they are trading tends to range. If you are a range trader who wants to scalp for a few pips every time you trade, you should avoid the day NFP data is released for trading. This is a highly volatile day for the markets.
However, if you use breakout trading as your trading strategy, understanding which economic data is expected to be released on a particular day can help you in your trading. You should plan your trading strategy in accordance with the significance of the economic data to be released.
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.
You should also know which data causes knee jerk reaction in the markets and which pieces of data will have lasting reaction in the forex markets. - 23218
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 @ 1:56 AM
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