In the field of Forex trading, it is very important that you stay aware of the exchange rate at all times. This value is what helps determine if a currency pair is worth buying or selling. The exchange rate of a country determines its economic strength, which is what makes the former a very important trading criterion.
A currency's value and a country's economic stability are determined by certain underlying factors. And as Forex traders, being able to understand these factors will give the necessary momentum to get ahead of market risks and make steady profits from all movements. When a country's economy is strong, it is safe to trade its currency - that's the general idea of studying exchange rates.
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| Forex trading strategies in Philippines |
Here are 6 major factors that influence the Forex trading industry:
1) Inflation Percentage:
A country that has a lower inflation rate will see more appreciation in its currency value. Low inflation periods lead to a very gradual rise in the value of commodities. When a country's inflation rate is low, its currency value will rise to keep up with the demand. However, countries that have a high inflation percentage will see a falling currency value.
2) Current Account:
Foreign investment earnings and trade balance are what a country's current account comprises of. Everything from export-import to debt information is reflected on this account. When a country spends more on import than it earns through exports, depreciation is caused.
3) Political Stability:
If a country's political stability is in shambles, no growth can be expected from it while Forex Trading. Countries that have good leadership across all levels are bound to bring economic growth. This also indicates that the country is more focused towards development, thereby making its currency a safe investment choice.
4) Interest Rate Changes:
High interest rates provide high rate to lenders, thereby leading to an appreciation in currency value.
5) Public Debt:
When a country has a lot of debt incurred, investors are less likely to invest in it and the country itself won't be in a position to acquire foreign capital. This would ultimately lead to their exchange rate dipping.
6) Terms of trade:
The terms of trade is a ratio used to denote the export-import value. When a country has higher export prices than import prices, the demand for said country's currency increases, thereby leading to an appreciation of its exchange rate.
Many Forex traders ignore the weight these factors carry in the foreign exchange market! Don't make the same mistake; with exchange rate knowledge, finding profitable trends to capitalize on will be a breeze. Master your Forex trading skills with Forex Trading Strategies in Philippines experts at WesternFX by your side! Avail our world-class currency trading brokerage today and see the magic happen.
