Now you have picked a topic that can have an incredible impact on your CFD trading style. Many newcomers treat the exchange-market just as a replacement for a casino of gambling instruments. They somehow manage as capital and waste them betting whimsically, hoping the price will act according to their wish.
But the Singaporean traders who are feeling interested in CFD trading should know that making money at trading is tougher than making money gambling. Gambling doesn’t require anyone to analyze or keep an eye on any variable constantly. However, trading is highly unlikely. One has to be vigilant of many price actions influencing factors to make a profit.
The market is highly sensitive to various factors. The price movement for a pair depends on many delicate and subtle changes that are happening continuously worldwide. So, what are the factors that direct a price course only by fluctuating themselves?
Market Influencing Factors
Knowing about different market influencing variables is just one step ahead of creating a proper trading strategy. Because no strategy can be effective until it deals with those variables, and define executable tasks for every probable situation, keep on reading to know about those factors. Before we move to the details, make sure you always use the best CFD trading platforms or else, technical glitch can cost you losing trades.
1. Interest Rate
To trade in the Forex market, you have to choose a currency pair first. While choosing a pair, the first trait of the pair you check is its exchange rate. It’s the amount you have to pay to buy the base currency with your quote one. This exchange rate greatly depends on each one’s interest rate decided by the respective currency’s government’s central bank.
The Central banks can change this interest rate whenever they wish to accord with their financial objective. For instance, if a Central Wants to limit the use of their currency, it will increase the rate of its currency. On the contrary, it will lower the rate to ensure more people to use the currency it represents.
By moving the interest rate, a central bank sets the value of its currency against other currencies.
2. Inflation Information
Countries where the inflation rate is relatively lower experience higher currency value. That’s because they have more purchasing capacity than other countries. So, while trading choosing the pairs representing economies with a lower inflation rate will bring a kind of edge to that trade.
Around the 20th Century, countries like Canada and the U.S. had a higher inflation rate than countries like German, Japan, and Switzerland. But that scenario has changed later on.
3. Political Condition
Other than a country’s economic condition, its political condition is another critical factor that affects its currency exchange rate. Investors are always inclined to invest their money in pairs, which represents politically stable nations.
A countries’ foreign policy says a lot about their intention about their standing point. Investors tend to be aware of any fluctuation of such policies. Except for the national politics, a country’s geopolitical volatility, growth in the global trend, and internal business environment impact its reputation in the Forex market.
Speculating and finding the proper time to identify an optimal business is what traders do to make a fortune. The industry faces changes that come without showing pre-indication.
A trader, who is good at speculation and making the right decision at the right moment believing in his own intuition, finds trading much more friendly. An effective speculation skill is not only about the ability to analyze the current position of a trade, it’s also about looking at different countries’ current accounts. It will outline what is going in the country’s import and export sectors and forecast an imminent move.
All these market influencing factors affect the Forex industry the most. Once you know what they are and how they impact the market, start to track them. Learning to extract information from them will be your greatest capability when it comes to your trading vocation.