The decision as to when to buy or sell currencies is as important as deciding what to wear to the office this morning or what to have for breakfast. In Forex, timing is crucial. It is so much so that your success in trading will actually hinge on it. Not what you have for breakfast, but that other decision on buying/selling will.
The Factors To Consider When Buying/Selling Currencies
There are a lot of outside variables that can have an impact on your buying/selling success. It’s sort of like how the weather outside will help you to determine what to wear to the office. Cooler, wetter weather will cause you to be a bit more cautious in your clothing choice. You could say that the following factors may give you reason to be cautious in your Forex trading.
Labor reports are powerful tools. They can push the currency market like a bulldozer plowing through dirt or snow. The economy is closely connected to employment data so if there are layoffs, this will likely have a negative effect on the market. New start-ups hiring everyone in sight in order to meet demand for their products may have an opposite effect. One key piece of information every trader should follow is the US non-farm report on payrolls. This document is released the first Friday of the month.
Spikes In Interest Hikes
Spikes of any kind are something to pay attention to. Hikers in particular must be careful not to step on one and possibly get hurt. In Forex the hikes that come from spikes are far less dangerous but still require your attention. Hikes in interest rates typically point to one thing and one thing only: the economy is doing just fine. Hikes in interest rates come from various sources including rising retail sales, rising inflation rates, rising GDP figures and a decreasing unemployment rate.
Commodity Price Increases
When commodity prices shift up or down expect it to be because currency prices are doing the same thing. They are closely related, but not as close as you and your sister are. Oil prices and gold can impact different currencies in different parts of the world. This is a huge barometer to monitor.
A margin is something you use in your trading account to allow you to open larger positions than you normally can with your account. By using this leverage as part of your trading strategy, it can give you some important wiggle room when timing your buying/selling moves.
Rollover Interest Rates
Brokers use these interest rates that come from them holding your position overnight. In other words, it rolls over into the following morning. The rollover rate can work in your advantage and as a result give you an attractive buying/selling window.
What Does It Really Mean?
These factors show you that trading Forex is not as easy as hopping in your shower and turning on the water. It takes some forethought, planning and a lot of other outside influences to make things gel. It’s like thinking about taking a shower, picking out your outfit for the day and laying it out, then going into the shower. It’s not complicated, it’s just more methodical than random.