T.G. Cooper's Forex - Currency Conversion Blog
Stay updated on the Forex news of the day.
Monday, November 22, 2010
Euro ticks higher vs dollar as Ireland hopes rise
Understanding the Basics of Fundamental Analysis in the Forex Market
Traders typically approach financial markets in one of two ways: either through technical analysis or fundamental analysis. The reality is that history is full of traders who have had very successful careers as traders that employed both of these types of analyses.
In fact, in Jack Schwager's best-selling classic, Market Wizards, two of the traders interviewed are Ed Seykota and Jim Rogers. Rogers is quite adamant in his statement that he believes it is impossible to make a living as a technical trader. He goes so far as to say he has never met a rich technician. Seykota actually shares the exact opposite story. According to Seykota's own interview, he was a struggling trader when he traded according to fundamental analysis. It was not until he became a technician that he started to make a living trading financial markets.
As stated, successful traders throughout history have employed both technical and fundamental analysis. In this article we are going to break down the basic principles of fundamental analysis in the forex market.
Fundamental Analysis is commonly defined as a method of evaluating a specific security in order to determine its intrinsic value by analyzing a host of economic and financial data. In the foreign-exchange market, a security would be a currency. Market participants are continually analyzing the emerging fundamental from a country in order to determine the intrinsic value of the country's currency. There are several key economic indicators that every trader should understand on a basic level. Fluctuations in the data of these key indicators will generally cause the value of a currency to rise and fall.
Interest Rates
These are the single greatest driver of currency value over the long-term. Most Central Banks announce interest rates each month, and these decisions are watched very scrupulously by market participants. Interest rates are manipulated by Central Banks in order to control the money supply in an economy. If a Central Bank wants to increase the money supply, it lowers interest rates, and if it wants to decrease money supply it raises interest rates.
Gross Domestic Product (GDP)
GDP is the most important indicator of economic health in a country. A country's Central Bank has expected growth outlooks each year that determine how fast a country should grow as measured by GDP. When GDP falls below market expectations, currency values tend to fall and when GDP beats market expectations, currency values tend to rise.
Inflation
Inflation destroys the real purchasing power of a currency, and, therefore, inflation is very bad for the economy in most circumstances. Each year a normal rate of inflation between 2-3% is expected, but if inflation begins moving beyond the upward targets set by the Central Bank, a currency value will actually rise due to expectation of an imminent rate hike. Higher interest rates tend to fight off inflation.
Unemployment
We will discuss consumer demand in a moment, but people are basically what drive economic growth; therefore, unemployment is the backbone of economic growth. When unemployment levels increase, it has a devastating effect on economic growth; consequently, when the labor market contracts and unemployment increases, interest rates are often cut in an attempt to increase the money supply in the economy and stimulate economic growth.
Consumer Demand
As stated in the previous point, people are what drive economic growth; as a result, healthy consumer demand is essential to the normal, healthy functioning of an economy. When consumers are demanding goods and services, the economy tends to move forward, but when consumers are not demanding goods and services, the economy falters.
Even if you are a technical trader, it can still be very helpful to understand these basic elements of fundamental analysis. The best forex course will oftentimes offer further insight into how the emerging fundamentals drive price behavior.
Sunday, November 21, 2010
New Zealand Dollar: Risk of Sharp Declines on Financial Market Stress
Rescue of the euro
In this blog, our correspondents respond to breaking news stories and commentary and analysis. The blog takes its name from newsbooks, the 16th-century predecessors of newspapers, for which a single big story, such as a struggle, a disaster or a sensational process
Darlene Nelson Falling Stocks 2 DVD Set
![Darlene Nelson Falling Stocks 2 DVD Set](/51qpAfCRoJLSL500.jpg)
Don't know about you, but all of the stocks I have owned go down faster than they go up. Imagine if you made money when stocks go down! Now you can learn how the professional does it and make a ton of cash in the process.
It is simple to learn how the downside works, whether you decide to sell stock short, buy puts, or write covered calls. Once you have learned the upside plays, learning the downside will only take about 10% of the effort to learn...because you already know so much. The sad thing is most people are missing the best money in the stock market if they are not playing the downside.
Falling stocks mean FAST PROFITS!
This is Darlene Nelsons 2 DVD training program that originally sold for $1000. They are in excellent condition. For those of you who do not know Darlene Nelson, she has retired more traders than anyone in the biz. Here is a real trainer and trader who knows what she is talking about.
Price: