If analysis of the market is done before trading then there are less chances of loss. Analysis of the Forex market is of two types, Fundamental Analysis and Technical Analysis. Fundamental Analysis is the study of demand and supply of currencies in the Forex market. Fundamental Analysis is more useful for the beginners. The Economic Indicators used in the Fundamental Analysis are the GDP, Imports, and Exports etc. Government policies, industrial production, international trade and interest rates are some other factors that are considered important by the analysts for doing Fundamental Analysis. This analysis helps the traders and investors to know that which currency pairs they should trade, which Forex news to rely on and what the right time to enter a Forex trade is.
After you have decided which indicators to interpret for doing the Fundamental Analysis then you must know how analyze and interpret the Economic Indicators. Interpretation and analysis of the Economic Indicators should be accurate because the Economic Indicators affect the Forex market to a great extent. Some of the important Economic Indicators are Gross Domestic Product (GDP), Durable Goods Orders, Trade Balance, Unemployment Rate, Interest Rate, Consumer Confidence Index (CCI), NFP [Non – Farm Employment Change], ADP Non – Farm Employment Change, ISM Manufacturing PMI, ISM Non – Manufacturing PMI and Retail Sales etc. Accurate analysis and interpretation of these Economic Indicators help the traders and investors to analyze an economy’s health of any country correctly.
Not only the analysis and interpretation of the Economic Indicators is sufficient but the traders and investors must also know how to trade the news risks. Too many profit earning opportunities arise in the Forex market everyday but it is not possible to take benefit of all the opportunities because no one knows that when the market will take U turn and all the trades will be execute at stop loss. Better is to react on the market news and react with in time. Risk trading is beneficial in such cases but the question is how much risk to take. The traders and investors must not risk more than they can afford to loss. Trades in case of market news should not be placed without stop loss because trading without stop loss is like jumping from the helicopter without a parachute. The traders and investors must be well aware about certain terms to understand Forex Trading correctly to earn profit and these terms are volatility, wide spreads, and slippage and order freeze.
After analyzing and interpreting the Economic Indicators and calculating the news risk, the traders and investors must also know the right time to enter a trade. The right time to enter a trade in the Forex market is the time when the major Forex markets overlap. For example, in the time period between 2am – 4am EST the market of Europe and Asia overlap and in the time period between 8am – 12pm EST the market of North America and Europe overlap. So these overlapping hours are the right hours when the traders and investors should enter a trade and earn profit.
Economic Calendar Forex Trading use by all of Traders as Forex news has high impact on Forex Trading The most dynamic market of the world is the Forex Market that is open 24 hours a day. Traders can find possibilities to enter a trade 24 hours a day and trade at the right time. The right time to enter a trade is when the trading volume is the highest. The volume is heaviest in the situation when the major markets overlap.