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Understanding The Forex Market Movements
Written by: PaxForex analytics dept - Tuesday, 31 October 2017 0 comments
The forex market is the largest most liquid market in the world with average traded values that can be trillions of dollars per day. There is no central marketplace for currency exchange; trading is conducted over the counter. The forex market is open 24 hours a day, five days a week and currencies are traded world wide among the major financial centers of London, New York, Tokyo, Frankfurt Hong Kong, Singapore, Paris and Sydney. Forex is the larges market in the world in terms of the total cash value traded, and any person, firm or country may participate in this market.
Extreme liquidity and the availability of high leverage have helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for months. Currency prices are based on objective considerations of supply and demand and cannot be manipulated easily because the size of the market does not allow even the largest players, such as central banks, to move prices at will.
In forex market we usually face a constant flow of global political, economic and financial events. Thus, sometimes it is hard to adjust your trading strategy in time. The best way to efficiently trade and make money on forex from the events is to learn how to anticipate certain outcomes. Otherwise, you will be a reactive trader, and it is usually not as beneficial as it could be if you would have predicted an event. Therefore, we need to plan, anticipate, and then act as soon as the
market conditions are in line with our expectations. Forex market movement predictions play a huge role in becoming a pro forex trader.
Like most financial markets, forex price movement is primarily driven by supply and demand. Banks and other investors tend to want to put their capital into economies that have a strong outlook. So if a positive piece of news hits the markets about a certain region, it will encourage investment and increase demand for that region’s currency. Unless there is a parallel increase in supply for the currency, the disparity between supply and demand will cause its price to increase. Similarly, a piece of negative news can cause investment to decrease, in turn lowering a currency’s price. For this reason, currencies tend to reflect the economic health of the region they represent.
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. When it comes to forex, predicting even the next 5 minutes is difficult while no one can really do much but speculate. However, 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.