26 January, 2020

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How To Predict The Forex Markets?

Forex trading involves foreign currency exchange and typically what Forex traders do is watch the trends and place bids against currency pairs. These trades can either gain or lose depending on the direction of the said currencies. Traders observe the direction of various currencies and invest in trades that have higher payout chances. Forex markets are open twenty-four hours and there are market makers who watch these trends and set prices for traders. 

Forex traders and brokers alike stocks of major players in the economies of the home countries of the trading currencies. This is because the rise or fall in the stocks of such major players such as import and export corporations and multinationals will determine if the exchange rate of the said currency will go up or down.

Predicting and forecasting the direction Forex trade will take is not easy. However, there has been the development of various tools and resources that assist traders and Forex brokers make more accurate predictions. International Forex companies such as Alpari have better-predicting resources than those locally based.

Trends

Understanding the trends of different currencies is the key to successful predictions in Forex trading. Trend movements that are important to know and understand to make good predictions are; upward trends, downward and sideways. The trends are gauged with the direction of a chosen currency movement concerning the graph. When it is upward, the value is appreciating while downward means it is depreciating. Sideways mean the value is stagnating neither appreciating nor depreciating.

Forex Analysis

This is also an important aspect required to make more accurate predictions. Forex analysis is done with the use of data collected from Forex trading platforms and currency exchange rate statistics. There are two types of Forex analysis:

  1. Fundamental Analysis: this involves the study of data to evaluate the external events that impact and influence the prices of currencies. 

When we use this type of analysis to predict future Forex markets, we consider parameters that can be predicted as there is available data on key drivers of a certain currency’s price. Although, some aspects are not predictable, such as weather changes that may affect logistics as well as natural calamities that might strike when least expected. Other factors are predictable and are at the forefront of this analysis. These include:

  • Inflation
  • Interest rates
  • Economic growth
  • Geopolitics
  • Trade and capital balances
  • Imports and exports
  • Employment and minimum wage

Predictions based on this analysis depends on how much data you can access about the currencies in question. For example, a trader in New York may have more data than a trader in Nigeria. Trading brokers and trading platforms are a great source of data used in technical analysis. Traders might find it hard to get data from places like Africa where Forex trading does not date back many years. However, large Forex trading companies like Alpari who are found in most countries will have data that can be very valuable.

  1. Technical Analysis: this relies on patterns and trends that have been identified from historical price charts and statistics to predict the future movements of a chosen currency in the market.

When one has up to date data and the right tools, they can manage to do both short term and long term Forex market predictions.

 

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