Jayden The forex trading market is driven by fundamental factors. Fundamental factors can affect the supply of a currency and the demand for a currency in the market.
Fundamentals are where it all begins. If you can master fundamental analysis, you can take a big step in Forex profitability.
When you start thinking about all the things that happen in the world every day, from the performance of the Japanese stock market to the number of crude oil produced in Saudi Arabia, you will realize how desperate it is that there are thousands of fundamental factors that can have an impact on the Forex market every day. No one can track the dynamics of every single thing that happens every day. But trust us, what you can’t do, no one else can do either.
Some Forex investors may only follow commodity prices, while others may only follow the direction of the London stock market. Information that is important to one investor may not necessarily important to other investors. However, none of this matters. To be successful in the forex market, you don’t need to pay attention to every single thing that happens in every corner of the world.
Many different fundamental factors have had an impact on the forex market in the past. While some of the same fundamental factors will have a consistent impact on the forex market, many will not. Here, we will highlight 6 fundamental factors that play a significant role in driving the forex market.
However, we would like to state up front that these 6 factors do not make up a complete list of all the factors that affect the Forex market. It is impossible for us to provide such a list. We can only lay a solid foundation for you. With this foundation, your path to investing will be smoothed.
You may be wondering if you can make money just by using these fundamental analysis tools that we present to you next. Of course, the answer is yes. However, you will most likely start your investing with these few fundamental analysis tools, and then as you trade deeper, you will be exposed to and use more and more of them. This is a natural progression. Never stop learning. If you are able to invest correctly, you will never stop learning further either.
You have to remember that it is in your best interest to start your investment with fundamental analysis and then gradually work with technical analysis in order to develop a perfect investment strategy. Be sure to keep this in mind when learning about fundamental analysis tools, as we will also have a discussion of technical analysis afterward.
Every fundamental analysis tool is based on a fundamental factor, as shown in the table below
1. U.S. Government Factor in the Forex Trading
Anyone can find the time to follow these 8 fundamental analysis tools, especially when 5 of these 8 tools are only updated once a month. In addition, these are all things you can learn about in your daily life anyway. You know when oil and gas prices are rising. You also know when commodity and grocery prices are going down. You know these because they affect your life.
Now, focus on these two big areas. When the US economy is doing well and will help you make big gains in the forex market, pay attention to it. Pay attention when the US economy weakens and you can use your profits in the forex market to offset other losses caused by the weakening economy.
Life goes on forever. No matter what happens, pay attention and make the most of them.
The US government has more influence on the value of the dollar than any other fundamental factor. We know this is obvious, but despite this, you will not be able to ignore its value in forex trading. Usually, if you simply focus on this, you can also make a profit.
The US government has an overwhelming influence on the economy of this country through its spending and policy decisions. Whether Congress proposes to add a new social welfare program or the Federal Reserve intends to change its monetary policy, the economy will be affected.
When the US economy is affected, the forex market is bound to react accordingly. Don’t make the mistake of thinking you have to be glued to the C-SPAN channel 24 hours a day. You don’t need to do this. But you should pay attention to two fundamental factors that are under the complete control of the US government: the national debt and the Federal Reserve interest rate
2. Inflation Factor in the Forex Trading
We have all heard our grandparents and parents talk about how much of the cars, houses, and various household items used sold in the past. Your grandparents couldn’t believe how expensive goods are selling now, and you’d be hard-pressed to believe that your grandparents paid less for their first house than you did for your first car.
But no matter what generation you are, we all have to accept the fact that the price of goods will continue to rise and there is nothing we can do about it. We all have to accept inflation
3. The US stock market Factor in the Forex Trading
The US stock market is a “barometer” of the health of the US economy. If the economy is doing well, the stock market will follow suit. If the US economy and the stock market are both doing well, the US dollar will usually strengthen. Financial markets around the world are linked and if you learn how to take advantage of one of them, you can easily take advantage of the others.
The real magic of the forex market is revealed when you combine it with other more profitable markets, such as the US stock market. When the stock market is doing well, the forex market can accelerate your money-making. When the stock market is doing badly, the forex market can again make up for your losses. Most of us are involved in stock trading in one way or another.
Even if you don’t have high expectations of the forex market, you should use it as a complement to your stock market investments and improve your overall return on investment.
4. China and Other Emerging Markets Factor in the Forex Trading
China has emerged as the next great world power. With a population of over a billion people, hard-working and cheap labor, and a staggering amount of natural and economic resources.
A decade or two ago, no one would have imagined that this country, founded on the most populous land in the world, would be able to exert its influence on another world superpower.
communist regime on the most populous land in the world would one-day decree reforms that would open its doors to the Western world. But he did. The world is constantly changing
5. Oil Factor in the Forex Trading
Oil is a buzzword in the global economy. Whether it’s bemoaning the soaring price of oil, or discussing whether many of the problems in the Middle East would no longer be a problem if the United States were less dependent on oil.
Overall, everyone is talking about oil. It is amazing that such a greasy commodity can have such a wide and profound impact on the global economy
6. Breaking News Factor in the Forex Trading
Breaking news is the uncertainty in forex trading. Record gains in U.S. stocks will push the dollar higher, while a terrorist attack will pull it lower. Whether the news is positive or negative, you should always set a stop loss to protect your account. Once you have set a stop loss, you will learn that breaking news is not something to be feared.
These breaking news stories help you to have a 50% chance of making a profit in the Forex market. But more importantly, these breaking news stories will eventually become the past. It is wiser to take advantage of the long-term trends that these breaking news stories trigger.
