Many successful traders attribute their success to their ability to skillfully predict forex market movements. Forex is one of the most volatile markets that presents a number of exciting investment opportunities for traders. Having a solid understanding of market mechanics is essential in helping you as a trader to fine-tune your entry and exit points as well as your stop loss levels. This in turn leads to stronger and more accurate trading results.
Learning to read a currency quote is the first step in understanding forex market movements. Currencies are recorded in pairs or in terms of how much one currency is worth relative to another currency. If you want to profit from this type of trading it is essential to have a fair understanding of various factors that influence currency price movements. In addition, there are useful tools and charts to help predict even the slightest fluctuations, which sometimes can give you the opportunity to earn significant profits and avoid losses.
Factors such as geopolitics, economic growth, interest rates, capital flow, trade flow, and interest rates are few of the common factors that can have an effect on the forex market and currency pairs. By using a combination of technical and fundamental analysis it is often possible to predict forex market movements correctly although not always with 100% accuracy. It requires a deep understanding of currencies and price movements or else you could end up with bad trades.
Listed below are four main factors that influence forex market movements:
- Buyers entering the market - When buyers enter the market they create a ‘bullish’ reaction, which results in upward price movements.
- Sellers entering the market - When sellers enter the market a similar reaction is caused, whereby the market experiences a ‘bearish’ reaction, resulting in downward price movements.
- Buyers exiting the market - Similar is nature to when sellers enter the market, when buyers exit the market, this causes a downward or bearish price movement.
- Sellers leaving the market: - Sellers leaving the market results in a bullish reaction, thus resulting in upward price movements.
Human psychology may not be wholly predictable - but human nature is constant and this will show in repetitive high odds chart patterns which occur again and again. If you spot and act upon them you can make money. So,remember when looking at forex price movement, it is not the fundamentals that are important or the news - but how investors as a whole perceive the news. If you understand the above, you will see why simply following charts and acting on the reality of price change can make you money.