Many people wonder why the prices of the currency pairs are not stable in Forex. One, while trading with the commodities, may find it volatile and decide to trade with the pairs. The condition remains the same in currency and the traders want to know the reason behind. There are many factors that affect the price movement. Some of the notable are the global economic news, the currency correlations and the time sessions of the different market. This article will explain for a better understanding of the traders how the movement is changed over the time on the chart.
The time session affect the volatility
We all know there are major trading sessions in this sector. When these sessions overlap, the investors call it an ideal time to place trades. A person may find it profitable but the time also has an effect on the volatility of the prices. If a major session has opened, for example, and the traders place the trade without knowing, he will find the movement is smoothly going in a certain direction. When trading, try to find an appropriate session for more chance of success. The professionals wait for the right time and increase the profit. When placing the trades, keep this idea in mind and go for a major session.
Impact of the global economy
A small change in the performance of a certain country’s economy might result in heavy market volatility. The new traders in Hong Kong always look for easy trade setups and ignore the importance of fundamental analysis. But if you fail to understand the key reason for the massive market movement you will never become a good trader. You have to understand the impact interest rate decision on a certain country. At the initial stage try to understand the price movements in your trading platform during the event of the high impact news release. Forget about making a profit and concentrate on your learning process.
The traders’ and brokers’ investment
Even the broker offering the platform also wants to make a profit. It is the reason why people invest and try to get the trend in their favor. If the chart is showing high volatility, stay out of trading. There will be many trends but a volatile pattern is not a good idea for funding if you do not have enough experience. Though everyone is working for their own benefit, it changes the price direction and every investor gets a chance to make the money.
The currency correlation
It is an old concept but people do not try to understand the hidden idea. Imagine a person is staying in US and trading with the pound. If there is a correlation, he can expect the price will either go up or down, depending on the market. Know the correlation when taking the decision. It will help to develop a better concept of the currency trading. It also decreases the analyses and provides a better opportunity in Forex.
It is the last but the most important factor that affects the price indicator. As every country are taking part in this trading, the number of factors involved with fund increases. This as a turn makes the industry volatile to economic news. Before trading, know the global economy and plan the strategy. A country experiencing economic trouble will not show a smooth price on the chart. The strongest economy has stable direction and dollar is the most popular currency for this reason. The world economies also affect the movement.
Understanding the price movement of the financial instrument is really hard. At the initial stage, you might become frustrated and quit trading the Forex market. To be honest this is good to a certain extent. Unless you have the courage to overcome the obstacles in trading business, you should never consider trading as your fulltime profession. Most importantly, learning is a continuous process when it comes to the investment business.
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