In trading, results are defined by knowledge of market workings. Exchange rates are always in flux, as they are moved by myriad factors. From interest rates to military strife, there is a lot to consider. Fortunately, the trading community has quite a few roadmaps. Here are the basics of prediction.
Every rookie may adopt fundamental, technical analysis, or both. Without online charts for trading like https://trade-in.forex/category/markets/, the task would be insurmountable. State-of-the-art technical aids facilitate decisions, helping to identify the most lucrative moments.
To make consistent profits, monitor the health of economies tied to your chosen pair. For instance, a trader of GBP/USD will zoom in on events in the UK and the US. The scope of possible drivers is broad, as it includes both micro and macroeconomic factors.
This system of thought relies on a constant flow of related news. Factors affecting economic strength are also likely to sway the respective currencies. Here are the most basic factors:
- Interest Rates
Higher rates attract more investment from overseas The more foreign capital — the better for the national currency. Thus, its value rises.
This fundamental measure is defined by economic activity overall. In essence, it is the sum of goods and services produced over a certain period. The faster it grows — the more valuable the currency.
Weak economic systems have high unemployment rates. Shortage of jobs results in lower interest rates for foreign investors. Eventually, the currency loses value.
- Trade Balance
A deficit means the nation imports more than exports, so the demand for its products is insufficient. This is a negative factor for the currency.
Traders keep an eye on the economic calendar included in trading terminals. This reflects predictions based on current indicators. The range of incoming data is impressively broad. This includes:
● new data,
The second methodology is focused on price data. Adherents aim to identify patterns and likely movement. The premise is the inevitable repetition of regularities (i.e., trends). Patterns are known as signals, and they are revealed by analysing previous data.
Traders use charts depicting volumes and prices. They consider aspects like direction and strength of trends, volatility, support and resistance, indicators of a cycle, etc. For these participants, nothing is ever random. Every upward and downward trend is logical and tied to objective factors.
Which Method is Best?
There is no single recipe for accurate forecasting. Traders may opt for either approach or use both. A rookie should study both systems, and choose the most convenient methodology. As there is no universal solution, what really matters is consistency and willingness to learn. Try ready-made approaches, and find the style and strategy that suits you best