How Economic News affect Forex? -Learning Center-

Economic indicators are snippets of financial and economic data published by various agencies of the government or private sector. These statistics, which are made public on a regularly scheduled basis, help market observers monitor the pulse of the economy. Therefore, they are religiously followed by almost everyone in the financial markets. With so many people poised to react to the same information, economic indicators in general have tremendous potential to generate volume and to move prices in the markets. While on the surface it might seem that an advanced degree in economics would come in handy to analyze and then trade on the glut of information contained in these economic indicators, a few simple guidelines are all that is necessary to track, organize and make trading decisions based on the data.

Know exactly when each economic indicator is due to be released. Keep a calendar on your desk or trading station that contains the date and time when each stat will be made public. You can find these calendars on the N.Y. Federal Reserve Bank Web site using this link, and then by searching for “economic indicators.” The same information is also available on many other sources on the Web or from the company you use to execute your trades.

Keeping track of the calendar of economic indicators will also help you make sense out of otherwise unanticipated price action in the market. Consider this scenario: it’s Monday morning and the USD has been in a tailspin for three weeks. As such, it’s safe to assume that many traders are holding large short USD positions. However, on Friday the employment data for the U.S. is due to be released. It is very likely that with this key piece of economic information soon to be made public, the USD could experience a short-term rally leading up to the data on Friday as traders pare down their short positions. The point here is that economic indicators can effect prices directly (following their release to the public) or indirectly (as traders massage their positions in anticipation of the data).

How Forex market work? -Learning Center-

History of The Foreign Exchange Market

The Foreign Exchange market, also known as the “FX” or “Forex” market, is the biggest financial market anywhere in the world. The daily average turnover is over $1 trillion US — a volume more than thirty times the size of all U.S. equity markets combined.

“Foreign Exchange” occurs when one currency is bought at the same time another is sold. Currencies are always traded in pairs: e.g., EUR/USD (Euro & US Dollar) or USD/JPY (US Dollar & Japanese Yen.)

Around 5% of turnover each day is from governments and companies that buy and sell services or products in a foreign country or that convert foreign currency profits into domestic currency. The other 95% is trading for speculation.

For speculators, most popular forex trade options are the Majors, or the most commonly traded currencies. The Majors include the US Dollar, Canadian Dollar, Australian Dollar, Japanese Yen, Swiss Franc, Euro, and British Pound. Today, more than 85% of all daily transactions involve trading of the Majors.

Forex trading is a true 24-hour market, beginning in Sydney every day and circling the globe as the work day starts in each financial center: Tokyo to London to New York. Unlike other financial markets, forex investors are able to respond to fluctuations in currency, whatever the reason, via online currency exchange or other telecommunication options 24 hours a day.

The forex market is considered an interbank or over the counter market because the transactions take place over the phone or throughonline currency trading. There is no central currency exchange, unlike with the futures or stock markets.