There are several fundamental factors that help shape the long-term strength or weakness of the major currencies and will affect you as a forex trader. We’ve included what we think are the most important for your reading pleasure: Economic Growth and Outlook We start easy with the economy and outlook held by consumers, businesses, and…
We just learned that currency prices are affected a great deal by changes in a country’s interest rates. We now know that interest rates are ultimately affected by a central bank’s view on the economy and price stability, which influence monetary policy. Central banks operate like most other businesses in that they have a leader, a president,…
As we mentioned earlier, national governments and their corresponding central banking authorities formulate monetary policy to achieve certain economic mandates or goals. Central banks and monetary policy go hand-in-hand, so you can’t talk about one without talking about the other. While some of these mandates and goals are very similar between the world’s central…
Interest rates make the forex world go ’round! In other words, the forex market is ruled by global interest rates. A currency’s interest rate is probably the biggest factor in determining the perceived value of a currency. So knowing how a country’s central bank sets its monetary policy, such as interest rate decisions, is a crucial thing…
Along your travels, you’ve undoubtedly come across Gulliver, Frodo, and the topic of fundamental analysis. Wait a minute… We’ve already given you a teaser about fundamental analysis during Kindergarten! Now let’s get to the nitty-gritty! What is it exactly and will I need to use it? Well, fundamental analysis is the study of fundamentals! That…
Trading Breakouts With breakout trades, the goal is to enter the market right when the price makes a breakout and then continue to ride the trade until volatility dies down. Breakouts are significant because they indicate a change in the supply and demand of the currency pair you are trading. You’ll notice that, unlike trading stocks or futures,…
In order to fade breakouts, you need to know where potential fakeouts can occur. Potential fakeouts are usually found at support and resistance levels created through trend lines, chart patterns, or previous daily highs or lows. Trend lines In fading breakouts, always remember that there should be SPACE between the trend line and price. If there is a…
Fade the breakout you say? Was that just a typo? Did you mean to say, “trade the breakout”? Nope! Fading breakouts simply means trading in the opposite direction of the breakout. Fading breakouts = trading FALSE breakouts. You would fade a breakout if you believe that a breakout from a support or resistance level is…
Breakouts are popular among forex traders. It makes sense right? When price finally “breaks” out of that support or resistance level, one would expect the price to keep moving in the same direction as the break. There must have been enough momentum building up in order for price to have broken out of the level, right?…
As you learned earlier, when a trend moves for an extended period of time and it starts to consolidate, one of two things could happen: The price could continue in the same direction (continuation breakout) The price could reverse in the opposite direction (reversal breakout) Wouldn’t it be nice if there was a way to know to confirm a breakout?…