How to trade forex according to a strategy? The most common currency pair for trading is the EURUSD pair, as the currency on the left is called the base currency and it is the currency that one wants to buy or sell, while the other currency is called the secondary currency and it is used to conduct the transaction.
Trade forex according to a strategy
Each currency pair has two different prices, the selling price of the currency and the buying price, and this difference between them is called the spread, which is the amount obtained by the broker to open the position for trading. The higher the liquidity ratio, the narrower the price differences.
Prices are displayed in about 4 numbers after the point, such as 1.2356 US dollars, where the change in price appears in the fourth figure after the point. In the forex market, differences, gains and losses are displayed in points.
trade forex according to a strategy Among other terms in the forex market is “short-term buying”, which is the action of buying and selling, respectively.
Some traders in the forex market call the bull market term, which is incorrect, when the market rises, but the terms bull market and bear market are used to define the direction in which the market is heading.
Experienced traders in the market will be able to use their strategy in the event of a bullish market rising and a bearish market falling, as this step enables them to speculate on the market movement correctly and make a lot of profits.
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What factors affect the forex market?
trade forex according to a strategy Currency exchange rates in the forex market depend on several factors, such as the rate of supply and demand, political and economic stability and monetary policy of countries.
With regard to supply and demand in the forex market, the decisions of central banks and monetary policies taken by some countries represent the main driver in the market, in addition to the economic data issued by central banks and international financial institutions regarding unemployment rates, total spending and consumption, and others.
trade forex according to a strategy Before these institutions start publishing their reports, investors anticipate what might happen in the market.
As for other factors that may affect currency prices, they are the news reports of each country, the positive ones play a role in increasing the rate of demand for the currency of this country and thus the currency will rise. As for the negative news, it will certainly weaken the demand for the currency and thus its price will decrease.
Market sentiment is one of the factors that may affect the movement and activity of the market. When investors expect that the currency will head to the downside, they will trade with the decline, which reduces the demand for the currency and thus its price decreases.
trade forex according to a strategy Among other important factors is the credit rating of a country, which is an independent assessment of the possibility of repaying the country’s debts.
This means that any country with a high credit rating may witness a rise in the price of its currency, and vice versa, any country with a low credit rating may witness a decline in the price of its currency.
However, since forex trades are straightforward, it is speculation that mainly influences price changes in the market.
If traders predict that for some reason or event a particular currency will strengthen or weaken, they will trade and change the price in the market, because supply and demand for the intended currency will change within the market.
trade forex according to a strategy The more people expect the currency to move towards a certain direction, the greater the impact on prices in the market.