Factors affecting our trade in forex

1. Inflation Rates

Changes in market inflation cause changes in currency exchange rates. A country with a lower inflation rate than another's will see an appreciation in the value of its currency. The prices of goods and services increase at a slower rate where the inflation is low. A country with a consistently lower inflation rate exhibits a rising currency value while a country with higher inflation typically sees depreciation in its currency and is usually accompanied by higher interest rates

2. Interest Rates

Changes in interest rate affect currency value and dollar exchange rate. Forex rates, interest rates, and inflation are all correlated. Increases in interest rates cause a country's currency to appreciate because higher interest rates provide higher rates to lenders, thereby attracting more foreign capital, which causes a rise in exchange rates

3. Country’s Current Account / Balance of Payments

A country’s current account reflects balance of trade and earnings on foreign investment. It consists of total number of transactions including its exports, imports, debt, etc. A deficit in current account due to spending more of its currency on importing products than it is earning through sale of exports causes depreciation. Balance of payments fluctuates exchange rate of its domestic currency.

4. Government Debt

Government debt is public debt or national debt owned by the central government. A country with government debt is less likely to acquire foreign capital, leading to inflation. Foreign investors will sell their bonds in the open market if the market predicts government debt within a certain country. As a result, a decrease in the value of its exchange rate will follow.

5. Terms of Trade

Related to current accounts and balance of payments, the terms of trade is the ratio of export prices to import prices. A country's terms of trade improves if its exports prices rise at a greater rate than its imports prices. This results in higher revenue, which causes a higher demand for the country's currency and an increase in its currency's value. This results in an appreciation of exchange rate.

6. Political Stability & Performance

A country's political state and economic performance can affect its currency strength. A country with less risk for political turmoil is more attractive to foreign investors, as a result, drawing investment away from other countries with more political and economic stability. Increase in foreign capital, in turn, leads to an appreciation in the value of its domestic currency. A country with sound financial and trade policy does not give any room for uncertainty in value of its currency. But, a country prone to political confusions may see a depreciation in exchange rates.

7. Recession

When a country experiences a recession, its interest rates are likely to fall, decreasing its chances to acquire foreign capital. As a result, its currency weakens in comparison to that of other countries, therefore lowering the exchange rate.

8. Speculation

If a country's currency value is expected to rise, investors will demand more of that currency in order to make a profit in the near future. As a result, the value of the currency will rise due to the increase in demand. With this increase in currency value comes a rise in the exchange rate as well.
 

Effective news for Traders

Aussie dented by weak China factory survey; yuan strengthens

 

© Reuters. Dollar, Euro and Pound banknotes are seen in this picture illustration

SINGAPORE (Reuters) - The Australian dollar tumbled on Thursday after a private survey showed China's manufacturing activity unexpectedly shrank in May, casting a cloud over the global economic outlook.
The Caixin/Markit Manufacturing Purchasing Managers' index (PMI) fell to 49.6, indicating a contraction for the first time in 11 months and coming in below market expectations.
The Caixin report, which tends to focus on smaller firms, contrasted sharply with official readings on Wednesday that had shown steady manufacturing growth in China.
The Australian dollar slid 0.5 percent to $0.7396 . The Aussie slipped to $0.7384 at one point, its lowest level since May 12.
"There have been signs of increased unsteadiness in China's economic conditions, starting from May onwards," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
Whether this unsteadiness would shake investor confidence in the global growth outlook in the second quarter would become a focus for market participants, Murata said, noting that emerging Asian currencies could come under pressure if confidence wavers.
China's yuan remained firm even after the weak factory activity reading. The onshore Chinese yuan touched its highest level against the dollar in nearly seven months after China's central bank set the yuan midpoint at the strongest level since November.
The yuan added to the gains made on Wednesday, when it rallied on views that China's central bank is now less inclined to allow the currency to weaken markedly against the U.S. dollar.
The onshore yuan rose to as high as 6.7878 per U.S. dollar, its highest level since November.
The offshore yuan rose to 6.7245 per dollar at one point, its strongest level since October.
A key resistance level for the offshore yuan was at levels around 6.70 per dollar, said Christopher Wong, senior FX strategist for Maybank in Singapore.
Other than the weakness in the Australian dollar, moves among major currencies were relatively subdued.
Sterling eased 0.1 percent to $1.2881 , edging away from Wednesday's intraday high of $1.2921, after a poll showed a slimmer lead for Prime Minister Theresa May's ruling party before next week's election.
The latest YouGov poll for The Times on Wednesday showed that May's Conservative Party is only 3 percentage points in front of the opposition Labour Party with the election just a week away.
Sterling had bounced back from $1.2770 touched on Wednesday, its lowest level in more than a month, after two other surveys showed May's poll lead in double digits, countering signs she might fall short of a majority in next week's election.
The euro held steady on the day at $1.1247 , staying within sight of last week's 6-1/2 month high of $1.1268.
The dollar edged up 0.1 percent against the yen to 110.92 .
Recent falls in U.S. bond yields have weighed on the greenback, analysts said.
Investors have been fretting that political turmoil in Washington could hamper President Donald Trump's planned tax cuts and other promised stimulus measures.
The Trump administration is under investigation by the Federal Bureau of Investigation and several congressional panels over alleged Russian meddling in the 2016 presidential election and potential collusion with the Trump campaign.

Greece, Italy uncertainties dent euro, Asian stocks, lift yen

 

© Reuters. Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt

SINGAPORE (Reuters) - Concerns about situations involving Greece, Italy and the European Central Bank kept the euro under pressure on Tuesday. 

European geopolitical fears sapped risk appetite, weighing on Asian stocks and lifting safe havens including the yen and gold, though trading was thin with several markets closed for holidays.

For Tuesday, European stock markets were set for a soft start, with financial spreadbetter IG Markets expecting Britain's FTSE and France's CAC 40  to open 0.15 percent and 0.3 percent lower, respectively, and Germany's DAX (GDAXI) to start the day flat.

The euro slid 0.45 percent to $1.1114 in its fourth session of declines.

James Woods, global investment analyst at Rivkin Securities in Sydney, attributed most of the currency's decline on Tuesday to a German press report saying Athens may opt out of its next bailout payment if creditors cannot strike a debt relief deal. 

"The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone," Woods said.

However, he cautioned against reading "too much into it" without more details or confirmation, adding it was unlikely Greece would forgo the bailout payment at this stage.

Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to aim to do both at their June meeting.

Comments by former Italian Prime Minister Matteo Renzi on Sunday in favor of holding an election at the same time as Germany's in September also raised uncertainty and pulled the euro lower.

So did a statement by European Central Bank President Mario Draghi reiterating the need for "substantial" stimulus given subdued inflation.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) fell 0.2 percent with U.S. and British markets closed on Monday.

China, Hong Kong and Taiwan markets are closed for holidays on Tuesday.

Japan's Nikkei (N225) ended flat, held back by a stronger yen.

South Korea's KOSPI (KS11) fell 0.4 percent as investors took profits following the market's record-breaking rally this month.

North Korean leader Kim Jong Un supervised Monday's test of a new ballistic missile controlled by a precision guidance system and ordered the development of more powerful strategic weapons, the North's official KCNA news agency reported on Tuesday.

South Korea said it had conducted a joint drill with a U.S. supersonic B-1B Lancer bomber on Monday. North Korea's state media earlier accused the U.S. of staging a drill to practice dropping nuclear bombs on the Korean peninsula.

European blue-chip stocks (STOXXE) fell 0.2 percent on Monday, with Italy's banking index sliding 3.4 percent, its biggest loss in nearly four months, after two lenders sought help to cover a capital shortfall.

Sterling retreated 0.2 percent to $1.2809 after British Prime Minister Theresa May's lead over the opposition Labour Party dropped to 6 percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans.

The dollar declined 0.4 percent to 110.88 yen .

The dollar index (DXY), which tracks the greenback against a basket of trade-weighted peers, however, advanced 0.3 percent to 97.751.

Markets are awaiting economic indicators including French first quarter gross domestic product, German inflation data for May, and U.S. inflation for April later in the session.

In commodities, oil prices retreated, as concerns lingered about whether the extension of output cuts by OPEC and other producing countries will be enough to support prices.

U.S. crude futures (CLc1) slipped about 0.1 percent to $49.78 a barrel.

Global benchmark Brent (LCOc1) fell 0.4 percent to $52.09.

Gold rose 0.1 percent to $1,268 an ounce.

Important green concept to know to trade in forex

 Basic Forex Market Concepts

You don't have to be a daily trader to take advantage of the forex market - every time you travel overseas and exchange your money into a foreign currency, you are participating in the foreign exchange (forex) market. In fact, the forex market is the quiet giant of finance, dwarfing all other capital markets in its world.
Despite this market's overwhelming size, when it comes to trading currencies, the concepts are simple. Let's take a look at some of the basic concepts that all forex investors need to understand.
Tutorial: Popular Forex CurrenciesMajorsUnlike the stock market where investors have thousands of stocks to choose from, in the currency market, you only need to follow eight major economies and then determine which will provide the best undervalued or overvalued opportunities. These following eight countries make up the majority of trade in the currency market:

• United States
• Eurozone (the ones to watch are Germany, France, Italy and Spain)
• Japan
• United Kingdom
• Switzerland
• Canada
• Australia
• New Zealand

These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most credit-worthy and liquid instruments in the financial markets.
Economic data is released from these countries on an almost daily basis, allowing investors to stay on top of the game when it comes to assessing the health of each country and its economy. (For more insight, see Trading On News Releases.)
Yield and ReturnWhen it comes to trading currencies, the key to remember is that yield drives return.
When you trade in the foreign exchange spot market, you are actually buying and selling two underlying currencies. All currencies are quoted in pairs, because each currency is valued in relation to another. For example, if the EUR/USD pair is quoted as 1.3500 that means it takes $1.35 to purchase one euro.
In every foreign exchange transaction, you are simultaneously buying one currency and selling another. In effect, you are using the proceeds from the currency you sold to purchase the currency you are buying. Furthermore, every currency in the world comes attached with an interest rate set by the central bank of that currency's country. You are obligated to pay the interest on the currency that you have sold, but you also have the privilege of earning interest on the currency that you have bought.
For example, let's look at the New Zealand dollar/Japanese yen pair (NZD/JPY). Let's assume that New Zealand has an interest rate of 8% and that Japan has an interest rate of 0.5% In the currency market, interest rates are calculated in basis points. A basis point is simply 1/100^th of 1%. So, New Zealand rates are 800 basis points and Japanese rates are 50 basis points. If you decide to go long NZD/JPY you will earn 8% in annualized interest, but have to pay 0.5% for a net return of 7.5%, or 750 basis points.

Understanding and applying stop loss

More Stop Loss Strategies

Harvesting Stops and multiple stops. Among forex traders there is a belief -- rarely matching reality -- that if you set a stop, your market maker may manipulate the market in order to "harvest" your stop and claim the profit from your loss.
In order to protect against this, some traders put in multiple stops -- some closer to the current trade price than others, so there is no single currency value that will harvest your entire trade. Realistically, however, few traders -- probably almost no individual traders -- make trades large enough to make such a move worthwhile even if your market maker had no qualms about engaging in the practice. Keep in mind that this is a business with a $4 trillion daily trading volume. For other reasons, however, it can be a good idea to set multiple stops. A sudden but limited move away from your trade position may take out your first stop or even your second, but if the market then reverses, some portion of your trade will still be active.

Stop and reverse. The stop and reverse stop loss strategy includes a stop at a certain loss point and simultaneously enters a new trade with a stop in the opposite direction. Using this strategy requires more market savvy than beginning traders can be expected to possess. Also, not all brokers accept this particular trade as a single order. In those cases, once the first stop is executed, you will need to execute a new order (one that is "the reverse" of the original order) and enter the new stop in this new direction.

Trailing Stops. This strategy addresses the trading maxim, 'Let Your Profits Run, and Cut Your Losses Short.' One way of achieving this -- or at the least a good way of making this more achievable os the trailing stop.  As the name suggests, a trailing stop trails behind the market price by a fixed amount. If your trade is moving into profit, the trailing stop moves upward with the rising market price. In this way, the percentage of loss you are willing to tolerate remains about the same as the market moves in your favor. If the market eventually moves against you, the trailing stop, having moved upward as you profited, protects you from a market move that wipes out the profit.

7 Points a trader in forex must know

Starting Advice:
if a new trader came up to me and asked, what one piece of advice to give to a new trader, the answer would be simple.
Do not try and beat the market!
The market is not something you beat, but something you understand and join when a trend is defined. At the same time, the market is something that can shake you out if you are trying to get too much from it with too little capital. Beating the market mindset often causes traders to trade against trends and overlords their account which is a sure recipe for disaster.
1. Low start up capital
Most currency traders start out looking for a way to get out of debt, or to make easy money. It is common for forex marketing to encourage you to trade large lot sizes and trade highly leveraged to generate large returns on a small amount of initial capital. You must have some money to make some money. It is possible for you to generate outstanding returns on limited capital in the short term.

However, with only a small amount of capital and outsized risk, you will find yourself being emotional with each swing of the market and jumping in and out and the worst times possible.

Solution:
People that are beginners in forex trading should never trade with only a small amount of capital. This is a difficult problem to get around for someone that wants to start trading on a shoestring.
$1000 is a reasonable amount to start off with if you trade very small. Micro lots or smaller. Otherwise, you are just setting yourself up for potential disaster.2. Failure to manage risk
Risk management is key to survival. You can be a very skilled trader and still be wiped out by poor risk management. Your number one job is not to make a profit, but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost.
Solution:
Use stops and move them once you have a reasonable profit. Use lot sizes that are reasonable compared to your account capital. Most of all, if a trade no longer makes sense, get out of it.
3. Greed
Some traders feel that they need to squeeze every last pip out of a move. There is money to be made in the forex markets every day. Trying to grab every last pip before a currency pair turns can set you up to lose the profitable trade that you are tradding.
Solution:
It seems obvious but, don't be greedy. It is ok to shoot for a reasonable profit but there are plenty of pips to go around. Currencies move every day; there is no need to get that last pip. The next opportunity is just around the corner.
4. Indecisive Trading
Sometimes you might find yourself suffering from trading remorse.This happens when a trade that you open isn't immediately profitable, and you start saying to yourself that you picked the wrong direction, and then you close your trade and reverse it, only to see the market go back in the initial direction that you chose.
Solution:
Pick a direction and stick with it. All that switching back and forth will just make you lose little bits of your account at a time.
5. Trying to pick tops or bottoms
Many new traders try to pick turning points in currency pairs. They will place a trade on a pair, and as it keeps going in the wrong direction, they continue to add to their position being sure that it is about to turn around this time. If you trade this way, in the end, you end up with much more exposure than you planned and a terribly negative trade.
Solution:
Trade with the trend.

It is not worth the bragging rights to pick one bottom out of 10 attempts. If you think the trend is going to change, and you want to take a trade in the new possible direction, wait for a confirmed trend change.

If you want to pick up the bottom, pick up the bottom in an uptrend not in a downtrend. If you want to top, pick a top in a corrective move higher, not an uptrend.
6. Refusing to be wrong
Some trades just don't work out. It is human nature to want to be right, but sometimes we just aren't. As a trader, sometimes you have just to be wrong and move on, instead of clinging to the idea of being right and ending up with a blown account.
Solution:
It is a difficult thing to do, but sometimes you just have to admit that you made a mistake. Either you entered the trade for the wrong reasons, or it just didn't work out the way you planned it. Either way, the best thing to do is just admit the mistake, dump the trade, and move on to the next opportunity.
7. Buying a System
There are many "forex trading systems" for sale on the internet. Some traders are out there looking for the ever elusive "100 percent accurate forex trading system". They keep buying systems and trying them until finally giving up deciding that there is no way to win.
Solution:
Accept that there is no such thing as a free lunch. Winning at forex trading takes work just like anything else. Build your system and stop buying worthless systems on the internet.

Today the market is really at peak

Forex Profit Targets

Profit target is the preset point to get out of a trade with profits to show for it. Usually profit targets are set at potential price turning points.

Traders use profit goals in many trading systems in order to manage the risk. In order to estimate you risk/reward per trade, you need to know where the worthy exit point is. Not only gain targets let you estimate the risk/reward, but they take sensations out of the equation. Just open stop orders with preset entry, stop-loss and profit targets and never look at them again until they get complete.
In Forex prices change so fast that sometimes it’s really hard or even impossible to close a profitable position before the price flashes back. How many times have you watched your unrealized profits eliminated and turned into losses? How many times did you kick yourself for not closing your position earlier?
There’s no reason to close the entire position when you get to your profit target. Instead, you can close off a part of it and use a trailing stop loss for the rest to make sure that you at least break even on the remaining part. This will secure the profit you made already and still make money if a larger move occurs afterwards.
Some believe that new traders can’t forecast profit targets. This is not true. Determining precise profit