Q: What should every Forex trader know every day before they start trading each day?
A: Anyone trading in the short-term needs to be aware each day of the data releases, influential speakers, and other potentially market moving events in the day ahead. Keep in mind that the economic data calendar for the forex market is multi-dimensional. On any given day it’s possible for items coming from several different countries to have an impact on price action.
Longer-term traders obviously don’t need to be as acutely aware of the upcoming data items and whatnot. They should, however, be aware of the goings on in markets which influence forex. Those include interest rates and commodities, and even stocks at times.
Q: I have heard that Forex never goes into bear market because there is always something going up and something going down. Is t
A: It is certainly true that
for any given rise in one currency, some other currency must be falling –
and vice versa. That is the duality of the forex market at work. If the US
Dollar is appreciating against the Japanese Yen, you could say it’s in a
bull market while the Yen is in a bear market. The complexity of the forex
market, however, is such that even if the Yen is in a bear phase against the
Dollar, it could be in a bull phase against another currency, like the Euro.
It should be noted,
though, that the US Dollar remains the dominant currency in the market.
Strength or weakness in the Dollar can at times be the biggest factor in
price movements across the board.
Q: I work full time, what are the times at which I will find the biggest and most tradable moves?
A: The single most active time of day for forex trading is the overlap
between the London and New York market hours, approximately 7:00am to
12:00pm Eastern Time.
In terms of price movement, though, it all comes down to which currency
is being considered. The major ones will move around the clock as events in
the major centers (London, NY, Tokyo) dictate. The more regional currencies
will primarily trade only during the timeframe their main market is open –
such as the Mexican Peso trading most during the North American market
hours.
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Q: Does the Forex markets trend better than other markets? And does that make Forex easier to trade?
A: I don’t have any specific data to back this up, but in my experience the Forex market does seem to trend better than other markets. That doesn’t necessarily mean it trends more often, but it does seem to trend more smoothly in a lot of cases.
Does this make Forex easier to trade? I don’t know as I would necessarily go that far. The Forex market definitely has its own character and ways of operating which come in to play. At the same time, it is also subject to the same kinds of hurdles other markets have – things like fake break-outs and unexpected responses to news items. All in all, I would say it’s about an even call.
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Q: To trade Forex successfully, do I really need to understand macroeconomics or can I just apply the technicals?
A: There are an awful lot of traders out there doing just fine with technical analysis, giving virtually no thought to the fundamental outlook of the countries whose currencies are being traded. In fact, forex draws a lot technical traders because in many ways it is about the most pure market from that perspective.
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