I’m here to share with some of my favorite tips to trade foreign currency. These should help you at becoming a better overall trader, that will lead you to more profits.
- You Buy For Exit, Not Price: I’m often surprised by the amount of people that look at the price of a currency and decide to buy. This isn’t smart. This doesn’t incorporate the idea of a profit based trade. The buying price isn’t really that important. You should be more interested in the exit price (sell price). This is where you make your profits, so ideally, this is where you’d want to focus. Pay attention to the exit value in the future compared to the buy price and you will start to find profitable trades.
- Federal Reserve: The Federal Reserve or “Fed” is the central bank in the United States. This bank is very important to follow, along with other big central banks like the Bank of England. Most people don’t understand the job that a central bank is given. Its job is to control the supply of money, so that it meets demand. As you can tell this is directly tied to the price of a currency. It’s a next to impossible job to get the supply perfect, so you’re going end up with these banks causing the supply to be too much or too little, which makes the price go down or up.
- The News: You should pay attention to the news, especially the economic news. Typically, the economic news is released at predetermined times. It rarely is “breaking” news. You should check the news in the morning because they will announce when this news will be released. Typically it’ll happen at 8:30-10:30am. The time really is dependent on the timezone. When you hear this economic news, you can pretty simply figure out if it is going to be good or bad for the currency, if it is good or bad for the economy. If GDP grows faster than expected, expect the currency to go up. If unemployment is higher than expected, expect the currency to go down.
By: Charles Nash
I’m currently giving a 7 day free forex course. Newbies and experienced are all welcome. If you’re interested in participating, check out the Casual Forex Trader.
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