Forex market is the largest market where currencies are solely traded globally. The partakers of this forex market are; a country’s central bank, investors, forex brokers, commercial companies and so on. Talking about how to predict forex market, every trader in the forex market should be able to have the total knowledge of what can possibly be factors that might affect forex market comprehensively before trading.
The investors of forex trade are independent by this I mean that for one to predict or forecast, succeed in the forex market, the trader must be knowledgeable enough [skillful and well experience], determined, to be successful in the market. One can say that behind every successful businessman, there is a skill, knowledge, and experience. The trader should also know the market is consolidating in order to avoid receiving signals that are not true. Without much knowledge of this consolidation, the trader will loss many chunks in the forex market, because this is something that doesn’t give a signal before it comes.
There are so many ways by which one can forecast or predict the tomorrows of forex market and there are;
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ECONOMIC GROWTH
What determined the rapid increment of a country’s interest rate from the central bank is how strong the country is economically. The increase in interest rate motivates the investors in their participation in the country’s forex trade or the country’s marketplaces. Economically, it is said that when there is an increase in demand there will be an increase in supply; so when the investors increase their participation in the market there will be increase in the of the country’s currency and this leads to increase in the exchange rate of the country as the country supplies or circulates the currency.
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INTEREST RATE
It is fundamentally certain that when there is an increase in a country’s interest rate, the country’s currency gains value and strengthened because investors will channel their assets to the very country so as to get an increase in returns.
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GEOPOLITICAL STABILITY
The political stability of a country has either a positive or negative effect on the activities that take place in the forex market.
For example, the nature of a president can cause an increase in a country’s currency or cause a decrease. Therefore, the political nature can by far be a major determinant in predicting the forex market in the areas knowing when to enter or exit a particular trade position.
TECHNIQUES USED TO PREDICT THE FOREX MARKET
FUNDAMENTAL ANALYSIS
A major method of predicting the forex market is by way of using fundamental analysis. Fundamental analysis cuts across different factors in the fore market. A trader has to pay attention to fundamental factors that can affect major financial assets such as gross domestic product, a country’s inflation rate, economic growth, exports and import ratio.
The technique behind fundamental analysis is the ability for a forex trader to pay close attention to the economic strength of various countries in other to make effective forex trading predictions.
Fundamental analysis provides information on how the geopolitical and economic events of a country influence the forex market. With regards to this, traders should make use of an economic calendar where major daily predictions around a good number of economic values based on present-day history are located. A standard economic calendar consists of date, time, currency affected, date release, actual, forecast and previous. These economic releases have shown to have a major impact on the movement of currencies in the forex market.
TECHNICAL ANALYSIS
Technical analysis is a trading technique which is based on predicting future price movements in the forex market on the foundation of past market data, with emphases on price data. The theory behind technical analysis is that history may repeat itself in predicting the movement of a particular currency pattern. The currency pattern generated by price actions are known as signals. Here, forex traders can uncover current signals in the forex market by means of a close examination of past signals. Technical analysis gives forex traders the ability to carry out daily prediction since price move in trends. Technical traders have the mindset that once a currency trend is established and identified, it is going to keep on for a period of time, hence, giving them the ability to predict the fore market.
In predicting the forex market using technical analysis, forex traders make use of volume charts and price charts which includes various indicators like bollinger bands, moving average, pivot points, technical confluence indicators, and support and resistance levels. The combination of these mathematical indicators helps to provide proper information on when to enter and exit a trade position.
Hence, trading the fore market with the proper prediction tool can help forex traders maximize profits while preventing losses. Effective use of fundamental and technical analysis is a good means of predicting the forex market.