There are two factors that move FOREX markets and if you understand how these two factors combine you will be able to make big profits.
The relationship is not understood by most traders so let?s look at it and how you can profit.
Let?s look at a simple fact first:
FOREX markets move in trends:
They move in sustained upward or downward directions, for periods of months or years.
These trends are not of course a one way movement and we see constant retracements, which can last for various periods of time.
These retracements can form shorter trends of a few days or weeks and can be against the major trends.
What causes these trends?
Currencies reflect the underlying economic health of the country the currency represents.
Economic cycles tend to last for months or years and these are reflected in longer term currency trends.
Markets don?t of course just respond to economic fundamentals, but also how people view these fundamentals.
Prices therefore are a combination of:
Economic fundamentals + Investor perception = Currency price movement.
Prices do not move logically, in relation to the underlying economic fundamentals ? they are influenced by the emotions of greed and fear of the investors.
When you trade currencies you have to be aware of this combination:
Price is determined by the economic fundamentals and investor perception of what those fundamentals mean.
The relationship is not understood by most traders so let?s look at it and how you can profit.
Let?s look at a simple fact first:
FOREX markets move in trends:
They move in sustained upward or downward directions, for periods of months or years.
These trends are not of course a one way movement and we see constant retracements, which can last for various periods of time.
These retracements can form shorter trends of a few days or weeks and can be against the major trends.
What causes these trends?
Currencies reflect the underlying economic health of the country the currency represents.
Economic cycles tend to last for months or years and these are reflected in longer term currency trends.
Markets don?t of course just respond to economic fundamentals, but also how people view these fundamentals.
Prices therefore are a combination of:
Economic fundamentals + Investor perception = Currency price movement.
Prices do not move logically, in relation to the underlying economic fundamentals ? they are influenced by the emotions of greed and fear of the investors.
When you trade currencies you have to be aware of this combination:
Price is determined by the economic fundamentals and investor perception of what those fundamentals mean.
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