FOREX & STATISTICS

Every second counts in Forex trading. Timing is the key to earning a profit whilst trading, catching the currencies at the right moment at the beginning of an upwards cycle. This can take hours of studying and research to predict when an upwards movement is about to take place and having the confidence to trust your system.

A trader that does their homework, especially on trading statistics and patterns and follows currencies in their respective pairs can be successful.

An example of following statistics is the EURO and what was then the German mark. Before 1999 there were lots of signs showing off the potential profit within the mark and its possible pairing to the EURO. The Euro then lost ground on the US dollar which gave way to the mark. This flow of events changed the structure of the market.

This information is invaluable to a beginner trader as it shows that Forex trading is full of massive financial risks but also great profit potential.

Researching is one of the most important points in becoming a successful trader. The Forex market tends to follow trends and when a drop occurs most will hit a certain level before beginning to rise again. This gives the trader a better chance to make significant profits.

GDP (Gross Domestic Product) is the measure of a nation’s income and output for a certain economy. It is the total market value of all goods and services produced over a period of time. GDP has a big effect on Forex trading as it gives a useful indication on how well (or not) an economy of a country is doing which in turn will have an effect on the country’s currency. The GDP only takes into account goods and services used – unsold stock is not counted.

Trade balance is important when considering Forex trading as it shows a countries current money flow. An economy which is exporting more than importing makes demand for their currency greater.  The other way round lessens the demand for a countries currency.

PPI (Producer Price Index) is a measurement of the rate of inflation. It shows the monthly fluctuation in average prices of fixed goods. Higher interest rates are increased by a higher rate of inflation which can strengthen a countries economy. PPI is similar to CPI (Consumer Price Index) whilst the PPI covers consumer goods in wholesale, CPI is based on retail.

If a country’s economy is dropping and prices of general necessities are rising consumers will be spending a lot less of their wages on retail, such as news clothes, games and other un-necessary purchases which will cause a further dent on a country’s currency as the economy cycle slows down.

A good trader of Forex will take all this data and measurements into account when assessing the market. If you can gain as much knowledge on the market as possible before trading you are putting yourself in the best position to make a profit. Trading on limited research is almost a guaranteed way to lose out. Only luck will be with you.