The dynamics of a trading market that always responds promptly to any type of competition therefore the forex exchange rate of a certain marketplace is the tune that gives the trading melody and sets the competition in perfect shape.
Most traders don’t posses any kind of economic education related to the movement of the foreign exchange rate therefore the FX market can sometimes be difficult to digest, let alone understand and even predict. This issue can usually be solved by adhering to a solid Fx signal providing website which will guide your economic movement.
The Basics of the Foreign Exchange Rate
Almost all currencies are traded on the Forex market on an impressive timetable which is virtually nonstop around the clock 24 hours a day, 7 days a week with some volume limitations over the weekends. The Forex market is open to anyone looking to buy and sell currencies or currency pairs. This includes international banks, currency brokers and even individuals.
At the base line of a successful calculation stands the basic knowledge of the economic events, economic data releases which can be both subjective and objective, trading instinct and ongoing international events.
The best example that I can offer is as follows namely the right value of the pound can vary very much from one country to another:
100 GBP = 148 US dollars
100 GBP = 127 Euros
100 GBP = 560 Polish zloty
100 GBP = 15,366 Japanese yen
Factors That Influence the Value of a Currency
The trading process begins with the opening of the trading session and you need to be aware that the values of that currency can fluctuate up and down over the entire trading day.
It can easily begin on a magnificent trading note and end on a low value. Because of these natural fluctuations on the chart you can easily create your personal trading strategy in order to take advantage of any type of sudden movements.
In order to counter this volatility several large international banks can shift their exchange rates for as much twice a day.
Some institutional investors and currency traders can easily make plenty trading actions per session and the profit value can begin to go as low as .001 on a bullet point.
There are three factors that have the most influence over the exchange rate:
1) Economic Factors
I decided to begin presenting these factors first mostly because they are highly objective and cannot be influenced directly by an individual. They mainly consist of the national GDP of a country, the economic balance of a trade, various economic regulations, inflation variations, economic deficits and volume surpluses.
2) Political conditions
These factors are mostly subjective because they rely on traders that use political jitters as advantages or disadvantages regarding the political environment.
Any type of political instability in a region such as political coupe or civil war is bound to have a significant negative effect on the national currency of that country.
3) Market Psychology
There are several national currencies such as the Swiss franc in the European Union and the USD in the United States that, over the time have build themselves a strong economic reputation of being a solid and safe investment. History has taught us that during harsh times of political unrest, social uprising and economic instability many investors quickly buy certain preferred currencies, usually the ones with the highest stability.
This intense buying action has the sole purpose of protecting their profits and assets.
The forex exchange rate influences our daily lives
The value of currency pair is continuously changing and for the untrained eye it actually goes unnoticed by most of us.
The impact of Forex market is bigger than you might expect it to be most because most goods, services and products are bought by national companies in a certain currency. If that currency is volatile and shifts very often in opposite directions chances are that the prices will fluctuate as well, in either low of big amounts.
Oil prices influences directly the price of the fuel that you put in your vehicle. You need to fully understand the importance of the Forex exchange rate because in this modern day and age it is the engine driving the evolution of our society.
In conclusion I think that you do not need an advanced economics degree to be an expert you just need to pay attention to each and every event going around you because that event will definitely influence the course of our daily lives.