What is forex is defined by a number of factors in the global currency market. Forex is short for foreign exchange, referring to the exchange of currencies from economies all over the world. This global currency exchange is the most liquid of all trading markets with trillions of dollars worth of transactions being made every single day. In every transaction made in the market, there are losers and there are gainers. Profiting from global markets does not happen in each and every trade owing to the volatility that defines what is forex.
The way to profit from global markets through forex is to study forex and the market and understand the forces that drive the market. Only by being in touch with the market can traders put together a winning strategy that turns in more profits than loses. Here are some of the factors that define what is forex and what conditions traders have to monitor to keep tabs on the forex market:
- Currency Valuation– what is forex is defined by the value of currencies being traded in the market. Foreign exchange values used in the forex market depends on the prevailing rates in the major trading exchanges in the world with the London market price taking dominance in currency quotes in other markets around the world. Currency price quotes fluctuate depending on both economic conditions and political conditions.
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- Economic Conditions– movements in monetary inflows, inflationary factors, interbank rates, trade deficits, and other macroeconomic conditions cause fluctuations in currency values. In some trading systems, these economic conditions can be included in the charting tools and financial analysis tools for cross-referencing against prevailing currency values. Major economic shakedowns such as what happened several years back can adversely affect currency values and cause traders to take flight by closing their position on the affected currency and moving to safer currencies.
- Political Conditions – important political events are closely related to how a country’s economy functions and performs as compared to external economies. It is therefore but natural for such political events to influence the valuation of currencies in the forex market. Political strife that threatens a country’s stability likewise diminishes the value of its currency in the international exchange. The natural reaction of currency prices would be to dip. How low and dramatic this dip is depends on the extent of impact of the political event to the country’s economy and its ability to maintain its stability.
Traders today enjoy the advantage of having technology at their disposal. All of the factors that need to be considered in trading activities can be accessed on a single monitor at the right time without the trader having to rely on several sources to get information. Communication lines and internet connections make it easier for traders and brokers to coordinate and implement a trading order in a matter of minutes. The same technology also makes it possible for even beginners in forex trading to read historical information and make sense out of the dots and lines in the charting tools. All these factors and technological advancements define what is forex in the modern world.
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