Economic Factors That Move 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.
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.
With time, you will learn that forex markets reaction to the release of different economic data also changes with time. US GDP figures used to be important for USD but they dont impact much.
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.
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, 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 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. - 23167
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.
With time, you will learn that forex markets reaction to the release of different economic data also changes with time. US GDP figures used to be important for USD but they dont impact much.
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.
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, 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 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. - 23167
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 @ 2:03 AM
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