Forex Secrets – Delusion No1
Forex Currency Rate And Economic Factors Impact On Exchange Rate
Forex Secrets
Executive Summary about Forex Secrets – Delusion No 1 by V Vasilevich
The delusion conceptually propounds that intraweek and intraday FOREX currency quotes movement is governed by either improvement or by deterioration of the state’s economic situation. But in reality, even in case the actual Forex news is superior to the estimated one, the FOREX quotes up/down movement is of 50/50 probability.
Once the job of Forex trader is gambling on FOREX exchange rates differential (FOREX pairs up/down movement), the following is to be realized to obtain faultless profit:
FOREX pairs pricing mechanism (say at point X where you are completing the market analysis)
Factors imparting growth/decline to FOREX rates (up/down from point X).
Thus, having understood the FOREX rates factors effective at the extra-exchange (book-maker) FOREX market and the given currency motive factors, a trader must possess distinct knowledge of whether to buy or to sell the given currency pair.
Forex rate constitutes a demand-supply balance for a given goods (currency). Poor demand brings about decline in a certain currency rate, with a high demand leading to the growth of the latter. Markets spot this point prior to any misbalance being detectable by you or by me or even by traders at the exchange floor.
“Price movement is governed by demand and supply. Should demand exceed supply, there’s a price rally and if visa versa, there’s a price decline. All economists do share these underlying principles”.
Hence, the role of fundamental analysis for FOREX market is readily apparent.
In scholar fiction one will discover roughly the following explanation, persistently wandering from book to book, from site to site and suggesting attaining successful trading at FOREX market by way of scrutinizing the country’s economic fundamental data, viz. by tracking the factors reflective of the country’s economy condition as below:
State economy condition dynamics indicators (GDP, trade & payments balance, current account, industrial production, etc. Stock indices, via average arithmetic index of the country’s securities market condition and dynamics. The country’s interest rate, since the higher the rate, the greater number of investors is eager to invest into the country’s economy and hence into national currency strength.
Rate of inflation (the higher the rate, the quicker the National Bank will hike the interest rate). The country’s gold and currency reserve assets.
Variation dynamics correlation of: balances of payment, trade balance, state budget, gross domestic product (GDP), etc.
Labor statistics (unemployment rate, new jobs, etc.)
Conclusions:
Progress in economy results in the currency exchange rate rally.
Decrease in economic indicators leads to the national currency rate decline.
To sum it up, critical economic and political news (whose calendar is issued in advance and is familiar to any trader) constitute a standing factor giving rise to misbalance and causing the currency rate fluctuations.
In anticipation of important economic and political news FOREX pair crawl to the rates as inspired by the estimates (“rumored trade”), whereas upon actual news there occurs a pulse motion of FOREX pairs in accordance with the scheme below;
Forex rate grows if actual news are better than the estimated one;
Forex rate declines if actual news are worse than the estimated one.
ARE YOU FAMILIAR WITH THESE ABC BASICS OF STUDYING FOREX?
Let us perform sort of point-by-point analysis.
The currency exchange FOREX market is a book-makers one. Then, http://www.forexite.com reads: “Trading is performed without actual currencies supply, which fact cuts overheads and enables Forexite to go long and short on the currency”http://www.forexite.com/forexite_advantages/forex_advantages.html.
- whose logics was coincident with that of THEIR clients (traders),
As a regular result, over 90% of the world traders are still loosing their deposits at FOREX each time they follow Thomas Demark stereotype that “All the economists share these underlying principles”.
Comment No.1. What should a trader lean on: practice or dogma even if supported by great names, provided that the trader is purported at earning money?
FOREX analysts issuing their daily bulky market reviews are not FOREX traders in the overwhelming majority (see detailed discussion below). Please, think over A. Elder words, that: “FOREX rates and the fundamental analysis are tied together with a mile-long rope. Forex news is a scheduled issue of fundamental data, which as a rule impairs FOREX rates a sharp pulse of motion. DJI at NYSE has fallen by 99.46 pips (-0.95%) towards closing at 10404.30. NASDAQ declined by 14.42 pips (-0.72%) to 1984.81. By contrary, FTSE100 has grown by 19.60 pips (+0.40%) to 4914.00.
By FOREX news headlines You might have guessed that the events are taking place at the Friday American session. Then Forex chart starts a new rally.
If affirmative, it will rush up by approximately 160 pips (Elliott wave 1 was 100 pips, while EW 3 is 60% longer). The FOREX day trading tactics will be given scrutiny in a separate chapter. Now, getting back to the currency chart. Each forex trader can provide from tens to hundreds of similar instances, where the news are of a certain vector, whereas, after a fraudulent rush along the news vector, a currency applies reverse thrust.
Traders are not a decisive factor, thus rates movement is in no way dependent on their will. Negotiate with tens of traders of the trading floor and arrange for a simultaneous entry long on some exotic FOREX pair. Fig.2. GBPUSD movement as of May 13, 2005.
There is a fall in Michigan sentiment index. The April US export price index was +0.6% with prior of +0.7%.
Hundreds of examples may be offered, where the Forex news vector is opposite to that of the currency movement. Note:
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