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David Arputharaj, Course Director: the Managing Director of Basix Forex is a well-known forex expert with nearly 35 years of hands-on experience in forex trading, forex consulting, derivatives and banking. He has a brilliant academic and professional background – kinoparks.ml Mathematics from IIT, Madras, Associate of the Institute of Bankers. Prime and Official interest rates of the major economies along with the latest inflation figures.
The value of the money is what attracts people, not its quantity. For Forex traders, money represents pips. A pip is a difference between the ask and the bid price of a currency pair. The more pips a trader makes, the better. Moreover, the value of a pip shows the value of money based on the volume traded.
We live in a world where fiat money is the backbone of the global financial system. On the other hand, central banks control fiat money. This makes central banks actions the cornerstone for money movement. When money currencies move, the Forex market moves. The art of speculation, or trading, depends heavily on these movements, also called volatility spikes.
Therefore, traders make use of anything possible to anticipate the moves of a central bank. Fundamental analysis in Forex trading strongly depends on the economic trading calendar. Fundamental analysis is the twin sister of technical analysis. That reason is part of Forex fundamental analysis. The FX news calendar is a listing of the economic events that influence currencies.
Any trader should know the economic news for the period ahead because it is free information. To trade the Forex market in any trading week without knowing the news is foolish. Can you drive a car without seeing the road? The calendar shows news from the most important developed economies that influence the Forex market.
If you combine the currencies, the Forex dashboard appears. The currency pairs listed above, move based on the events listed Forex economic news calendar. When released, volatility rises. The economic news influences markets throughout the trading day and week, and even over the weekend. Such events may be Chinese data typically comes out on Sundays or economic summits, etc. Even political and geopolitical events, like referendums and G20, etc.
The typical structure of any Forex market calendar looks like the one above. From left to right, the data to consider is the:. This one shows what every piece of economic data means and why it is important as a Forex economic calendar indicator. The red color signals an economic event at Trade Balance is the name, and the forecasted value is CAD0.
It represents the difference in value between imported and exported goods during the reported month. Hence, the bigger the data, the better for the currency. The frequency, historical data, the next release data and other details give the overall picture of the news. Such information exists for any news part of the fundamental analysis of Forex market. Not all data in the economic calendar matters, though. Traders focus on having an educated guess about what the central bank will do next.
Central banks meet regularly every month or every six weeks to set the interest rate on currency. Together with the interest rate, the overall monetary policy moves the Forex market. Trading is a game of probabilities. And in most of the times the market moves based on future expectations rather than the actual news. Between two central bank meetings, traders buy or sell currencies on future monetary policy expectations.
Anything else is secondary. The red economic events are the ones that move the market. The rest of the data is secondary in importance. Above is the important fundamental analysis of Forex market.
Traders focus on the red events and on what they tell about future monetary policy. What a central bank does with the interest rate on a respective currency is vital for that currency.
All of them have a mandate and set the monetary policy based on it. The pillar of their mandate is inflation. A classical mandate sounds like this: However, there is one central bank that has a dual mandate: The Federal Reserve of the United States.
It is no wonder now why the jobs data in the United States, namely the NFP number is crucial for the dollar. Knowing what data follows is a great advantage ahead of the market. The problem is that everyone looks at the same data. Yet, not everyone makes money in the Forex market. One way to succeed is to use the FX trading calendar correctly. Keep in mind that fundamental analysis in Forex trading is as important as technical analysis. Everyone knows these days that the ECB has a problem with inflation in the Eurozone.
More exactly, with the lack of it. In this relation, levels of 1. Higher inflation levels lead to the central bank raising rates. Contrary, lower inflation results in the central bank cutting rates. Higher rates mean a higher currency, while lower rates are bearish for a currency. It is clear now why inflation is so important for the central banks. Hence, it is one of the most important Forex fundamental analysis indicators. The end of October saw the inflation in the Eurozone unexpectedly falling.
Win percentage is the total number of wins divided by the total number of trades. What percent of the time do you win trades? Loss percentage is the total number of losses divided by the total number of trades. What percent of the time do you lose trades?
This is not necessary to do, but if you do have an abnormally large win in relation to your other wins, then taking it out will provide a more accurate look and expectations to your stats. This is not necessary to do, but if you do have an abnormally large loss in relation to your other losses, then taking it out will provide a more accurate look and expectations to your stats. The average gain per winning trade is computed by dividing the total gain from all your winning trades divided by the number of winning trades.
The average loss per losing trade is your total loss from all your losing trades divided by the total number of losing trades. The average holding time per trade is calculated by dividing your total holding time for all your trades by the number of trades. This stat helps in determining your max drawdown, or the worse possible scenario you have experienced so far. This can be computed by multiplying the loss percentage by the average loss and subtracting it from the win percentage times the average win.
This stat helps you determine the correct position size and how profitable your trading method is. Keeping track of how you feel will help you avoid trading during those frustrating times—like when you wake up right after a news event that you forgot about , and it pushes the markets fast, so you try to chase it.
This article discusses the guidelines and outline to build a trading model for forex or currency trading.
When being in bachelor school, he represented his university in the National Forex Trading Competition for students in Bulgaria and got the first place among other traders.