Analysing the forex currency pairs is not an easy job at all.
Not one or two factors decide the price fluctuation. There are multiple factors affecting price change.
**1. Inflation Rates
2. Interest Rates
3. Country’s Current Account / Balance of Payments
4. Government Debt
5. Terms of Trade
6. Political Stability & Performance
7. Recession
8. Speculation**
**All of these factors determine the foreign exchange rate fluctuations. If you send or receive money frequently, being up-to-date on these factors will help you better evaluate the optimal time for international money transfer. To avoid any potential falls in currency exchange rates, opt for a locked-in exchange rate service, which will guarantee that your currency is exchanged at the same rate despite any factors that influence an unfavorable fluctuation.**
It’s not an exaggeration to say that the Forex market is the largest financial market in the world, especially with a daily volume of $1.5 trillion. The FX market has no physical location and no central exchange. Instead the foreign exchange market operates through a huge electronic network of banks, corporations and individuals trading one currency for another.
For those who trade in Forex, knowing the techniques of how to forecast the FX market can be the resounding difference between those who trade successfully and those end up losing money. As soon as you start to learn about Forex trading, you should also start learning how to forecast the FX trading market. This article has been prepared with the purpose of helping you learn the basic Forex forecasting techniques and how to apply them in your FX trading.
The purchasing power parity
Relative economic strength
Econometric models
Time series model
We have discussed Forex trading forecasting and the main techniques to be used. We have also exemplified the methods of forecasting the direction of exchange rate. As you can see, the appliance of certain techniques requires complete understanding and certain trading skills. Not every technique will be suitable for everyone – it is a subjective matter. For novices, forecasting can be a tedious task – especially in the early stages of their career – but it is worth doing as the benefits have the potential to improve profitability.
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