Three top observations that make profits in Forex Market

 

The forex market sees an estimated $5.1 trillion traded globally every single day, establishing this entity as one of the largest and most liquid financial entities in the world. As a result, there are tremendous opportunities to seek out a profit as a forex trader, whether you’re in the market for short or long-term gains.

 

These potential gains are somewhat offset by high levels of volatility, however, and this undoubtedly requires investors to observe the market closely and follow the forecast of trending currencies before determining when to buy and sell specific pairings.

 

In this article, we’ll look at the three top factors that you need to observe as a trader, whilst asking why they’re so important.

 

Political Events

 

The first consideration is global political events, which encompass a wide range of factors and continue to impact currency values in real-time.

 

The reason for this is simple; as geopolitical events have a direct impact on macroeconomic metrics such as inflation, interest rates and a nation’s gross domestic product (GDP). In the event of negative political occurrences, for example, it’s not uncommon to see inflation rise and the value of the currency decline simultaneously.

 

We’ve seen a great example of this recently with Brexit, as sustained uncertainty has undermined the British pound and caused it to trade in an ever-depreciating range.

 

This has not only increased the cost of imports into the UK, but it has also created a long-term opportunity for investors to study associated pairings and hedge against the pound in favour of currencies such as the U.S. Dollar.

 

Economic World Policy

 

It’s also worth studying the economic world policy, which reflects the outlook of developed economies across the globe and impacts directly on the global balance of trade.

 

In the current climate, for example, we’re seeing a rise of populist politics and a subsequent increase in the number of imposed protectionist trade policies. The so-called trade war between China and the U.S. has seen the introduction of huge tariffs, and while talks between the two parties are progressing this has had a significant impact on the cost and volumes of international trade.

 

As the balance of trade declines and the imbalance between supply and demand grows, so too currency exchange rates fall slightly across the globe.

 

This is something that traders need to follow studiously before making investment decisions, as they look to factor in recent trends and review forecasts for the near-term future.

 

International Reports and Data Sets

 

If you’ve ever used an online trading platform such as Oanda, you’ll know that this service provider publishes a comprehensive economic calendar that includes data from all over the world.

 

This enables traders to identify the date of key international reports, relevant data set releases and fluctuating gold prices, which in turn informs their longer-term outlook and lets them schedule specific trades.

 

These reports have a direct impact on currency pairings, especially in terms of demand and the prevailing market sentiment. This will cause values to either rise or fall, whilst the precise nature of the release will also indicate whether these trends are likely to be short or long-term.

 

By observing these events and factoring them into your trading strategy, you’ll be able to invest far more efficiently and leverage key economic events to your advantage.