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Factors Influencing a Currency Pair Exchange Rate
Introduction The exchange rate refers to the value of the US dollar against the values of currencies of other countries. Such a rate helps determine how much we pay for imported goods and services and how much we receive for what we export, among other things. When the value of the US dollar drops, imports become more expensive, and we tend to reduce the volume of our imports. Simultaneously, other countries will pay LESS for some of our products and that will tend to boost export sales. If imports and exports are a substantial part of a country's economy, as is the case with Canada, the exchange rate plays a particularly important role in our economy. The exchange rate between two countries' currencies is particularly important if the two countries are heavily involved in trade. What factors affect an exchange rate? A country's exchange rate is typically affected by the supply and demand for that country's currency in international exchange markets. This is typically known as a floating exchange rate. If demand, for say dollars, exceeds supply, then the value of the dollar will go up. If however, the supply of dollars exceeds demand, then its value will go down. A huge amount of money is bought and sold on international exchange markets for many different currencies. Several factors influence the supply of, and demand for, a given country's currency. If INTEREST rates are HIGHER in, say, the US than in other countries, then investors WILL choose to invest in the US, increasing demand for the dollar, provided that the expected rate of inflation is not higher in the US than among our trading partners. If INTEREST rates are LOWER in the US than in other countries, investors will choose NOT to invest in the US, decreasing demand for the dollar. If the US INFLATION rate is HIGHER, investors are LESS likely to prefer the US -even with higher interest rates- because of the expectation that the value of the dollar will be ERODED by inflation. If our INFLATION rate is LOWER, investors are MORE likely to prefer the US, because there will be NO expectation that the value of the dollar will erode. Trade balance also has an effect on a country's currency. If world prices for what a country exports rise in comparison with the cost of that country's imports, that country will be earning more for its exports than it pays for its imports. The more demand there will be for that country's currency, the better the deal becomes. If investors are confident that the US economy will be strong, they will be MORE likely to buy American assets, pushing UP the dollar's value. If investors are not so confident that the economy will be strong, they will be LESS likely to buy the country's assets, pushing the dollar's value DOWN. Joshua Kunken is Chief Currency Analyst for www.foreignmarketwatch.com/index.shtml">ForeignMarketWatch.com
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Forex Training: Follow Your Gut or Your Broker Which way will the forex market move? Do you just follow your gut feeling? Or do you have Neo's sixth sense that would let you be one with the market and feel the underlying currents.Trading forex is a non stop action movie but a good one, where you really don't know who will win at the end. What I Learnt Losing £60,000 My First Year as a Full-time Trader During my first year as a local (independent trader) on the floor of LIFFE, I bought and sold 8804 FTSE futures contracts, about 40 contracts per day on average. The result was a loss of £61,620 or -£267 per trading day. FOREX 101: Make Money with Currency Trading For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating currencies were introduced. An Evaluation of the Devaluation A Minister of Finance is morally right to lie about a forthcoming devaluation and a woman has the right to lie about her age. This is the common wisdom. Reality of Online Forex Trading Foreign exchange trading is the trading of currencies. Most currencies can be traded. Why Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ... Have you heard the wise saying that a trader who fails to plan, plans to fail? I have, and I was once that trader! However, did you know that even though traders who have constructed a plan, which incorporates their trading stategy (their "edge"), they have a plan that is likely to fail?If we look at all traders who participate in the market: we have one group that fails to plan and therefore plans to fail; another group whose plan is failed; and a third group who properly plans and therefore does not fail.Is it any wonder that the success rate for forex traders is so slim?Well it doesn't have to be. Mechanical or Discretionary Trading - Which is Best? Discretionary TradingPure discretionary trading will rely solely on the traders judgement. For example a discretionary trader may spot a particular pattern developing on a chart and decide to enter a trade on that basis. Ways to Acquire Discipline in Trading One way to acquire discipline in trading.. Online Forex Q1: When you consider that the foreign exchange market has become the world's largest financial market, with over $1.5 trillion USD traded daily, where does it go from here?A1:The FX market is unique, in the UK there is no central exchange, we trade via the inter bank market. Forex Market Overview "FX" is an abbreviation of "forex" or "foreign exchange." Foreign exchange is the largest and most liquid market in the world trading approximately $2 trillion every day (that's over 30 times the daily volume of NASDAQ and NYSE combined). A Short Introduction To FOREX FOREX is the world's largest and most liquid trading market. Many consider FOREX as the best home business you can ever venture in. Internet and Computer Systems in the FOREX Business With every passing year the interest in electronic trading is bigger, more especially trading shares and currency through Internet. A new profession came forward - this of the currency dealer. The Secrets of the Super-Traders The first and perhaps most important "secret" is to realize that your methodology or approach (no matter how good) is only part of being a highly successful trader. This applies to any trading style including, day trading, swing trading or position trading. Trade Exit - How To Cut Losses And Let Profits Run Cut your losses short and let your profits run. This is the essence of your trade exit rules. Is The U.S. Dollar About To Reverse Course? For the first time in several years the U.S. Forex Trading Foreign exchange market, or better known as FOREX, is the world's largest and most prolific financial exchange market originated on 1973. Bearing the status of largest and most prolific currency exchange market, FOREX is the center stage where a vast majority of the currency trading or FOREX trading takes place, with a total daily turnover of currency worth more than $1. Money Management - The Holy Grail Of Trading Money management determines how much to risk on each individual trade. This is a vital element of any trading system - risk too much and the chances of going bust are too high, risk too little and the reward for trading is too low. Example of a Profitable Transaction in FOREX To make a profit, in the FOREX, a trader can enter the market as a *buy position* (known as going "long") or a *sell position*(known as going "short").For discussion, let's assume you've been studying the EURO. A Look at Online Forex Brokers An online forex broker is a firm that facilitates retail trading using Internet technologies. Global Forex Trading (GFT), one of the popular online forex brokers. The Secret of Reduced Margin Spreads One of the best kept secrets in trading is that of reduced margin spreads. You cannot name a trading method that provides more safety or a greater return on margin than does a reduced margin spread, while also being one of the least time- consuming ways to trade.
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