The Factors that Can Affect Currency Trading
Making currency trading investments is greatly similar to making stock investments: for each move you plan to make, you have to consider about a score of factors first. And since we want to help you avoid making bad currency trading investments, here’s a list of the common factors that readily affect currency trading.
Time
Time is definitely of the essence when it comes to currency trading. Do your best to avoid currency trading during off-peak hours because that’s when big players like hedge funds are busy finding and establishing their positions in the currency trading market.
Secondly, think of your currency trading investments as little kids who need constant, if not zealous, attention and guidance. You need to be informed regularly on the status of all your currency trading investments to be able to notice any negative trend.
Unemployment Rate
Basically, a high unemployment rate can cause the value of a currency to go down so avoid making currency trading deals that are in favor of currencies with high unemployment rates.
News Flash!
Let’s say you’re interested in the EUR-USD rate. At first glance, everything seems rosy about the euro and a lot of people are predicting the long-awaited – albeit never been realized – fall of the dollar. But before giving the go-ahead sign of your currency trading deal, are you aware that in twenty years, experts predict that the average American will be earning twice as much as the average European due to the stagnant economies of European countries?
So don’t just listen to rumors. Have it verified by watching, reading and listening to the news.
Interest Rate
It’s tricky to base currency trading decisions on interest rates but it is however necessary. High interest rates could bode well for currency trading investments because it may strengthen the currency of that country. High interest rates however can also reflect badly on the currency of that country when its stock market crashes.
When there’s uncertainty regarding interest rates, simply take note of the belief of the majority and base your currency trading decision on that.
Government Intervention
Some governments increase the flow of their domestic currency to lower inflation rates or increase the value of their currency. When this happens, it’s better to abstain from making any currency trading investment because at the moment, you’re not seeing the real picture of the country’s economy.
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