Everyone knows or have heard about the wolves of Wall-Street. These people are usually traders who work for Goldman Sachs, Merril Lynch, JP Morgan, CityGroup, Morgan Stanley, and others.
Whenever the central bank of a country introduces a change in its economy, the numbers on the financial markets around the world will go upsides or downsides. Traders are aware of this, so they follow the events closely in order to stay informed and know how to act.
What Is Forward Guidance?
Central Banks make public communication about the state of the current economy, and what would possibly be the outcome for future monetary policy. This communication practice is called Forward Guidance and is significantly helpful for traders.
Forward Guidance gives an estimated path for the interest rates that affect the decisions for making inversions or adjusting the prices on different business. It notes the public about possible changes in the economy; that way, it won’t come as a surprise when it happens. Forward Guidance is now widely used by most of the major central banks in the world, including the US Federal Reserve, the Bank of England, the European Central Bank, and the Bank of Japan.
Luckily for you, you’re about to learn about a money management technique that will probably end up saving you a lot of money!
Fixed Ratio is what they call it, and you’re about to know what it is!
That is why it is vital to make highly rational decisions while looking at a trading chart. The behavior of the masses is simply an aggregate of individual actions. From mass hysteria to bullish overperformance, all of it revolves around how millions of people feel about the conditions of a given situation.
There are three main groups in the COT report:
Knowing the groups is nice, but what matters is what a trader can do with such information. These are the most common ways top-traders use the COT report.
Ordinary shares, which represent the most common issued shares. Shareholders have the right to take part in the profits generated (called “dividend right”), general meetings, and liquidation balance. The contrary to an ordinary share is called a priority share.
For example, Robert Prechter predicted the dot-com bubble with a high degree of accuracy. Granted, it was 5 years too early. However, it still speaks about the potential advantages of this theory. And they lie at the heart of what has made Elliott Wave so divisive and useful at the same time.
The retail sales report is one of such elements, for it’s one of the most significant indicators of a country’s economic development.
Now it’s your time to learn what it is, what it does, and how to take advantage of it!
Since knowing the importance of central banks is paramount to execute good fundamental analyses, you’re about to learn just that in this post.
Since being one step ahead of the market is one of the best Forex strategies, we will now delve into NFPs and why they are so important for traders.
What Is The Non-Farm Payrolls Report?
It’s one of the economic indicators released by the US. It represents how many jobs have been added outside of farming, government, private household, and non-profit organisations.
The NFP report is released monthly and is one of the most closely watched economic indicators for estimating the current state of the US economy. It is prepared and published by the Bureau of Labor Statistics.
This article will focus on the effects of QT, but, in a nutshell, QE sets to encourage higher economy output by having interest rates close to zero while injecting money into the economy by purchasing different financial instruments. QT, by definition, is the opposite of that – removing money from the economy through similar measures.
Quantitative Easing, or QE for short, has been frequently talked about in recent history. Introduced as a way to incentivize economic stability and growth after the 2008 financial crisis, QE has become the centerpiece of most major central banks in the world
The effect of Quantitative Easing on the currency’s value is negative (currency depreciates). The logic is simple - more quantity of the currency by definition weakens that currency - more supply leads to lower prices.
Nowadays, GDP calculations can vary from nation to nation. There is no single formula to be used when trying to assess the economic health of a nation. However, the most widely accepted way to measure GDP by economists is the so-called expenditure approach. This system calculates the value of Y (GDP), by adding total consumption (C), investment (I), government spending (G), and net exports (NX) which are total imports minus total exports.
The final equation looks like this: Y= C+I+G+NX
The go-to platform for anyone interested in trading forex, there is no equal for this fantastic platform. MT4, as it is commonly known, comes with several features and capabilities that will help novice and experienced traders alike.
The main interface in MT4 gives traders access to all the technical tools they need to a proper and efficient technical analysis. Moreover, these tools can be used in real-time, which means traders can make quick decisions based on accurate information.
Traders can open demo accounts to test their skills. But, if they are ready to trade, the platform can be download for free at the developer's site.
When it comes to economic news, there are critical events any trader must track if they wish to do a highly reliable fundamental analysis.
However, there is a stronger case as to why CPI should be mandatory when looking at forex fundamentals.
Financial instruments are expensive, and companies will always find a way to pass that burden onto their consumers. It is this balance between how much a trader will make and how much it will cost them completing said transaction that determines profitability.
Obviously, there are different costs that any given trader might incur. But, when it comes to forex trading, the main one will always be the bid-ask spread. And when talking about the bid-ask spread, there are only two options to choose from: fixed or variable. Neither option looks better than the other at first look. After all, both have their own and highly distinct advantages and disadvantages.
Now, if a trader chooses to look at the fundamentals of a Forex pair, a very important data point is certainly the Purchasing Managers Index – known as the PMI. And understanding what it is, how it works and its importance in Forex trading can be paramount for anyone who wants to be a successful Forex trader.
But, what is it when it comes to Forex trading?
That’s what we’ll find out in this article. So, grab a drink and read on!
Due to its growing popularity among ECN brokers, many traders will need to familiarise themselves with cTrader, and this article will help you do just that.
It has led many to believe Forex to be a scam, but the truth is that profit equals work, and success stories are not unheard. You will find some of them below.
The following article should give you a good idea on how the Forex ecosystem functions and the general steps to take if you want to invest in it.
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