The Factors, Affecting The Forex Market. The Technical Analysis.
For a long time already there was obvious necessity of the scientific approach to the organization of the actions undertaken on capital markets by natural or legal persons. The availability of the developed mathematical apparatus aimed first of all on disclosing of tendencies of behavior of exchange indicators, allows to optimize these actions and to avoid excessive risk.
The brokers attending to activity on Forex markets irrespective of it is the basic or collateral investment activity for them, use one of two basic approaches for forecasting of the prices and decision-making on purchase and sale: the fundamental or technical approach.
The common sense prompts that for reception of the best results it is necessary to combine the best lines of both approaches with the least risk.
The fundamental approach reveals all pertinent factors influencing a price of currency to advance its intrinsic value. At the fundamental approach it is necessary to deal with rather long periods.
The fundamental approach allows the broker, the interested long-term changes in price, to take a market position and to keep it, giving a minimum of attention of an everyday life of the market.
The factors, affecting the Forex market.
1. The Financial.
The interest rate is the major motive factor of the market. Discriminate two principal views of the interest rate:
The discount rate is the rate on which the Central bank grants money to banking businesses.
The main rate is the normal rate of a loan/crediting in the given bank.
If the interest rate in the country is high, value of the domestic currency will increase and on the contrary.
2. The Political
Change of the Minister of Finance, board of the Central Bank, the government etc.
For example, results parliamentary or presidential election.
3. Policy of the Central Bank
The policy of the Central Bank is the fundamental factor advancing movement of currency. It operates the offer of money, the interest rate, value of currency by intervention on the market, in the World Trade balance and World inflation.
4. Speculation.
Speculation can have huge significance or in general it doesn’t have depending on current conditions in the market.
Hot money in the given country can be involved by expectation of increase of the interest rate or an exchange rate. Outflow of hot money can appear so prompt, as well as inflow that will lead to speculative pressure of the domestic currency and its easing.
5. Economic indicators
And now let’s speak about the technical analysis.
The technical analysis studies market action basically by drawing up of diagrammes for the purpose predictions of tendencies of the future change of the prices. The technical analysis uses statistics and produces the markets. Tracing and smoothing this data, adherents of this kind of the analysis try to describe and explain short-term price ranges.
The technical analysis is based on following positions:
1) Price action depreciates all.
2) The price moves on a trend.
3) History repeats itself.
Let’s consider these positions in detail.
Price action depreciates all.
The adherent of technical analysis believes that all factors, having though any influence on a currency – commercial, fundamental, political, psychological value and others – are actually reflected in a price of currency.
As a rule, these people are not interested in the reasons on which the prices increase or fall. The logic underlying the technical approach – the market depreciates everything.
The price moves on a trend.
The purpose of graphic representation of the price is to advance trends at early stages of their development for the purpose to trade in a direction of these trends.
History repeats itself.
At studying of action of the market it is necessary to deal with human psychology.
The diagrammes concerning last years reflect the certain laws shown on these diagrammes. These laws reveal optimistic and pessimistic market trends. And as these pictures worked well in the past, it is considered that they will continue to work so in the future.
As the price during each given moment effectively considers everything, in itself price range should give good reflexion of public opinion or psychology of brokers.
Before you decide to make a forex investment or start forex trading yourself, better find a nice forex book and learn more about forex market – this will save you from lots of troubles and traps.