Economic Factors That Move 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.
USD is the most important currency in the world. 90% of currency transactions are done in USD. In almost most of the currency trades, USD is either the base currency or the counter currency.
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 experience, you will understand that currency markets reaction to the release of different economic data with time also changes. A few years back, US GDP figures used to be important for USD but they dont have much impact now.
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.
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, as a breakout trader, understanding of which economic data is expected to be released can help you in your trading. You should plan your trades in accordance with the importance of the economic data to be released.
In short, knowing what economic indicators move the forex markets most is very important for you as a trader. It is important for you to understand which data the market deems 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. - 23217
USD is the most important currency in the world. 90% of currency transactions are done in USD. In almost most of the currency trades, USD is either the base currency or the counter currency.
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 experience, you will understand that currency markets reaction to the release of different economic data with time also changes. A few years back, US GDP figures used to be important for USD but they dont have much impact now.
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.
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, as a breakout trader, understanding of which economic data is expected to be released can help you in your trading. You should plan your trades in accordance with the importance of the economic data to be released.
In short, knowing what economic indicators move the forex markets most is very important for you as a trader. It is important for you to understand which data the market deems 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. - 23217
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 @ 2:23 AM
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