What is the Forex market, and how to be successful in it?
Many crypto enthusiasts have been very interested in the Forex market and how to be successful in it. There is almost no online educational material that those interested in Forex business have not read.
They ask top traders who have successful careers to read relevant articles on trading strategies, reviews of well-known brokerage companies such as the PrimeMarketCap review, and monitor geopolitical developments in the world daily that directly affect market price movements.
But did you know what Forex represents? Let’s start with the basics, shall we?
Forex – the famous currency market
Forex is a currency market. Currencies, unlike stocks, are economic tools but also economic indicators. Generally speaking, when countries were companies, currencies would be their stocks or stocks.
Therefore, central banks’ policies have the greatest impact on currencies because decisions on their monetary policy have a huge impact on the Foreign exchange market. The simplest and most obvious example is the interest rates set by the national bank of each country in the world.
Understanding how it can affect the economy will also help you understand how the Forex market works.
What happens when interest rates rise?
Once the famous interest rates rise, which only national banks can do, it is clearly a lot more expensive for participants in the Foreign exchange market to borrow that currency from the central bank. This causes a shortage in the supply of currencies and drives their price upwards.
Analysis – the key to successful Forex trading
The analysis is not only the key to successful trading. It is, to some extent, the only thing that allows Forex trading to work. There are two primary types of market analysis fundamental analysis and technical analysis.
Fundamental analysis is a developed form of audit, but at the level of the country, or sometimes the world. It is the oldest form of price forecasting that looks at various elements of the economy – its current position in the cycle, relevant events, forecasting the future, and assessing the possible impact on the market.
Fundamental analysis deals with a country’s GDP and unemployment rate, interest and export volumes, war, elections, natural disasters, and economic progress. The impact is delayed in terms of the effect on supply and demand. Recent technological successes in shale oil drilling, for example, promise a stable and increased oil supply today and shortly during the winter of 2014/2015. led to the lowest oil price in the last decade.
Fundamental analysis involves international economies and deals with factors that the market has not yet begun to pay attention to. The school of analysis works for investment and long-term trading.
Technical analysis is a younger market analysis that deals with only two variables – time and price. Both are strictly measurable, concern the market, and are indisputable facts. Because of this, Forex trading works better for many when they study charts than when they conduct economic research.
Whether drawing lines of resistance or support, identifying key levels, applying technical indicators, or comparing candle formations, you’re trying to figure out how online Forex trading works without considering supply and demand causes.
Technical analysis can be applied for short-term but also long-term trading. For fast-style investors, like scalpers who can’t rely on trends because they make a profit on Forex at the expense of infamous daily volatility, that’s the only functional analysis.
In conclusion, it’s important to understand that fundamental analysis is an economic detective with elements predicting the future. In contrast, technical analysis is visual, cost-time archeology combined with statistics.