The best way to predict movement in the forex market. If you just start to learn Forex, you may find it difficult to predict movement in the Forex market. On the other hand, when you talk with more experienced traders, they may claim that one of the things that make them success in Forex is their ability to predict the movements within the market. So, how can we predict the movements and be successful?
How to Predict Movement in the Forex Market
For the sake of gaining profit from trading in the Forex market, a trader must have a good understanding of the things that can influence the movement of a particular currency exchange’s rate. To help you predict accurately how the market is going to move, here are some of the most important factors to consider that enable better chance for success.
Factor 1: Economic Growth
Generally, the stronger economic of a country is, the bigger possibility that the country’s central banks to elevate rates of interest to arrest the growth of inflationary. Higher interest rates mean greater participation of the country’s investors to enter the financial market. When the number of investors increased, demand for the country currencies will improve too. And greater demand refers to improved currency rate too.
Factor 2: Geo Politics
When it comes to Forex trading, we should remember that a currency is representative of a country instead of certain company. Any trouble to the political landscape of a country will frequently influence the direction of an exchange rate movement. That’s why when it comes to Forex market you need to check out local political and economic news to help you predict the market movement.
Factor 3: Interest Rates
The value of certain currency improves accidentally with the rise in rates of interest. The improved value of a currency represents what is called as capital appreciation. This thing accordingly affords an investor profit opportunity. At this point, you can use the information to consider purchasing currencies from a country that has high rate of interest or finance the purchase with low-interest rate country.
Factor 4: Mergers and Acquisitions
This factor is usually considered as the least significant one among the other factors when it comes to predict market movement. Nevertheless, it is frequently the most influential force that near-term moves of currency are considered. Acquisitions and mergers happen when a company from certain region in wants to buy a corporation in other countries. It can be used to predict short-term market movement.
Factor 5: Trade and Capital Flows
Before you make your final prediction related to the trend or movement of certain currency, you are better determining whether or not this particular currency is reliant on its country’s trade flow or capital. In this case, capital flow stands for the amount of investment certain country gets from international sources. Then, trade flow refers to the income ensuing from trade.
This factor is important because several countries are able to be highly reliant regarding their capital flow while the other countries may be highly sensitive when it comes to trade flows. These two things will be extremely influential to the currency. That’s why it is better for you to consider capital and trade flows before predicting a trend of certain currency.
Final Thoughts
Those are some of the most important factors that you can use to predict the trend or movement of certain currency in the Forex market. At this point, you must have realized that you need to always be up to date about the global condition to know the direction of a currency in the Forex market. More importantly, you need to always learn Forex too!