The major concept in the capitalism world is how to predict the future of world money! Forex is the world money market that always moves. Presently, the foreign exchange market is one of the largest and most liquid financial markets in the world. Traders include large banks, central banks, currency speculators, corporations, governments, and other financial institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow.
Of the $3.98 trillion daily global turnover, trading in London accounted for around
$1.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0%. In addition to “traditional” turnover, $2.1 trillion was traded in derivatives.
Of course, the main concept is that Forex is driven by planets! How it works?
There are so many Forex trading strategies out there that it’s not surprising so many people don’t know where to start. But actually, all of those strategies are some combination of two different techniques: Fundamental and Technical analysis.
A fundamental analyst looks at a nation’s entire financial picture to guide the trades, studying international macroeconomics and the forces that drive the supply of and demand for a currency. There are five of these factors:
- Is the country’s government in good financial shape or in the red, and what is their financial policy (pro-business, labor, etc.)
- The balance of imports versus exports, which directly affects a nation’s money supply
- The growth of that country’s real gross domestic product (GDP); in other words, that nation’s purchasing power
- Interest rate levels
- Inflation level; in other words, how high are prices
The fundamental analyst looks at all these factors and balances them against each other to determine whether a nation’s currency will appreciate or depreciate. Of course, as the Forex market trades the currency of one nation against that of another, the fundamental analyst cannot simply study the economic picture of one country; she must study both of them, and then compare them to determine which paints a more compelling financial picture.
The technical analyst, on the other hand, looks only at the charts. He looks at the price of a currency pair (or any other commodity, such as oil prices or stocks) and sees how it has varied through time, examining the patterns it has drawn with an eye to predicting what it might do in the future.
The most successful traders use a combination of these two techniques, combining chart analysis with the timing provided by economic announcements to get the best of both worlds.