2Bull Forex Blog

The key to making money in the Forex Trading is understanding what makes currency pairs move. Well, it’s the fundamentals that make currency pairs move but yet not all the economic indicators are important. So which are the ones that can really shake the currency market? Below are some of the important ones which you can use as forex trading strategies:

1. Interest Rate: This is the most important economic indicator and it rules the forex market.
Economies with higher interest rates tend to have stronger currencies and investors are always looking for the greatest possible investment returns.

You will realise that if there is any changes to the interest rate to countries like United Kingdom, Europe, U.S etc, be it cutting or raising, most of the time there will be big movements in the forex trading market.

For example, if Europe has an interest rate cut, investors will sell Euro, which has a weaker currency now and invest in Great British Pound instead, which has a higher interest rate.
Central banks have to raise interest rate if there is too much inflation and you have to watch these two economic inflation indicators as the central banks will be looking at it too:

2. Consumer Price index(CPI): The higher the index is, the stronger the economy will be. Thus, forex traders may push the currency of that particular country higher if they find confidence in the index.

3. Producer’s Price Index(PPI): If prices for producers are rising, they will most likely pass those costs onto consumers. This lead to higher inflation and stronger currencies.

4. Gross Domestic Product(GDP): It is reported quarterly and is the primary indicator of economic strength. A higher GDP is often associated with higher interest rate, which is frequently positive for the currencies.

A forex trading tip: Sometimes you may see a currency pair dipped drastically because the actual results of the GDP is much lower than the forecast, so you might want to consider following the trend and sell that currency pair.

5. Payroll Employment: Monthly measure in payroll employment reflects the number of new jobs created or lost and is an important indicator of economic activity. In forex markets, large increases in payroll employment means that the strong economic activity could lead to higher interest rates, which is seen positive for the currencies.

6. Retail Sales: It is a measure of the total receipts of retail stores and is a major indicator of consumer spending. Rising retail sales are associated with a strong economy, which leads to rising currencies.

7. Durable Goods Orders: It is a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. It is a major indicator for manufacturing sectors. Rising durable goods orders are associated with a strong economy which leads to stronger currencies.

You may learn to trade forex by catching some good opportunities when there are news releases for the above economic indicators. Although the forex market is fundamentally driven, the best way to trade forex is to combine them with forex technical analysis and a forex trading system.

Forex brokers should be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC) and a NFA member. The CFTC and NFA were made to protect the public against fraud, manipulation, and abusive trade practices. Never make a check or bank wire payable to anyone other that a FCM registered with the NFA.

1. Doing Research: It is most important to thoroughly research Forex trading, and any companies you may be thinking of trading forex with, before making any kind of investments. Be sure to check out any claims made by a company, and make sure they are indeed members of one of these organizations, before even thinking of dealing with them. Some people just park their hard-earned cash with some forex trading organizations without first doing research on that company. It is a risk.

2. Stay Away From Promises That Sound Too Good to Be True: Those Get-rich-quick schemes, including those involving forex trading, tend to be frauds. There is no easy way of learning how to trade forex and earn consistent profits everytime. Always remember that there is no such thing as a “free lunch.”, you will really need to spend some time to learn forex basics. Some big investors invest with a large amount of funds, which are never to be seen again if deposited with those schemes.

3. Avoid Any Forex Company that Assures You Large Profits: Be extremely wary of those forex trading companies that guarantee profits. Nobody can offer sure guarantees where currency trading is concerned. In many cases, those claims are false. Learn to trade forex by yourself with a forex trading guide or ebook will be good enough, then slowly make your way up. The following are examples of statements that are most likely are fraudulent:

“Guaranteed to make a ROI of 40-50% within few days.”
“You will reach a million dollars fast in forex trading.”
“Make $5000 in forex trading every week!”
“You don’t have to learn how to trade forex, it’s all automated.”
“You will never lose again in forex trading.”

4. Avoid promises with little or zero risk trading: The guarantee of risk-free forex trading is another fraudulent claim. The fact that more than 90% of people failed in forex trading means there are risks in losing. the currency market is not the place to put any funds that you cannot afford to lose. No can will know how the markets will be performing in the future. Therefore, it’s either low risk or high risk trading, and NOT NO risk! Anyone who suggests that forex trading is risk-free is likely to be a liar or fraudster.

There are many different ways to approach the Foreign Exchange Market in order to make huge profits. No one single method is the best method in order to make money in this financial market, it is based solely on the person which to choose according to his or her preference and knowledge about the Forex Market. But no matter what method or what approach you take to enter the world of currency trading, it is important that you have the proper tools at your disposal. One such tool which is popular among professional traders in the market is known as pivot point.

Pivot point is a trading signal which indicates when and where to enter or exit a particular trade according to what happened the previous trading day. It is a simple to use yet it is a very powerful tool when it comes to short term trades which makes this a must have tool for most, if not all forex traders as it hones you to become more comfortable with feeling and seeing how the market moves which would result in more accurate decisions.

Also, being able to learn how to use pivot points with other forex trading technical analysis tools would make this approach very solid and profitable. It would prove your predictions even further thus it will improve your chances of making money when it comes to your predictions.

The world of currency trading can be very harsh and unforgiving. You have to be extra careful about your decisions to survive in this market.