Forex Capital Markets and Foreign Exchange Transactions

The Forex market is the foreign exchange market in which currencies are bought and sold continuously for profit. Forex-related capital markets exist around the world where transactions never stop in cash markets. No matter where you are trading from Sydney or Tokyo, you will find a huge number of dealers and Forex brokers staring at their computer screens and on the phone to monitor changes that may affect their trade.

Forex markets are traded for profit through buying, selling and currencies. Currencies are sold and always bought in pairs. Let’s take an example to illustrate The Infinity APP forex trading

Let’s assume that a trader trades in the EURUSD (all numbers are mentioned for example only) Suppose he bought 10 thousand Euros on 1 January when the EURUSD price was 0.9600 and later sold EUR when the exchange rate At the beginning of August. This means that the trader will receive $ 11,800 and then win $ 2200.

Since all currencies are bought and sold in pairs, one has to decide which currency pair to trade with. In our example, the euro is called the base currency while the US dollar is called the currency of the offer or the opposite currency. If you buy the euro (in that case you sell the dollar), then you base your decision on the belief that the euro will rise in the future and therefore when you resell the euro and convert it into US dollars, that means you get more dollars or other profits.

If your assumption is based on the possibility of a rise in US markets, then you will change the direction of your trades and sell the EURUSD – so you are selling the EUR (at the same time you are buying USD). These US dollars can be sold at a later stage to make profits.

Working in Forex trading markets requires you to be aware that there are a large number of factors that affect currency trading. These include economic and political conditions, the risk of climatic disasters or a sudden increase in agricultural production, all of which play a crucial role in foreign exchange markets.

Trading in the Forex market is done through so-called exchange platforms. The Infinity APP Software provides Forex traders the ability to trade according to the instant data as well as analyzing the currency position in which they trade. In this situation, they execute the buy and sell orders as well as stop trading orders. These are all related to the Forex margin account and thus give Forex traders ample space to carry out their transactions using small volumes of investments. The Forex market is competitive where you can get a large credit through the institution or broker as well as the source and quality of information helps Forex traders to make more wise decisions and then gives them a great opportunity to make better profits.

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How News Affect Forex?

Global financial markets are interdependent and highly dependent on financial statistics and macroeconomics. The Forex market is no exception. Major financial news, basic statistical reports and significant geopolitical events affect currency prices – the main instruments of the foreign exchange market. But nothing compares to seeing the actual effects of news on the Forex market. Here you will find three key examples of this effect.

Cash applications

News on monetary policy decisions by major central banks has an immediate effect on currency pairs. If the interest rate changes too quickly or too slowly, or when an unexpected suspension of interest rate changes occurs in the future, all of this will raise or lower currency pairs at the speed of light. When the Federal Open Market Committee (FOMC) announced the Federal Reserve’s first interest rate cut from 5.25% to 4.75% on September 18, 2007, after a long series of rate hikes, it was only to raise the EUR / USD upwards . On the hourly chart of USD / EUR we can see a jump in the price as the dollar lost part of its attractiveness coinciding with the low interest rate as the euro appreciated. The immediate reaction was followed by a strong bullish trend thereafter:

Macroeconomic data released

Macroeconomic data and reports on it are another important type of Forex news because of their strong and direct impact on currency rates. Quarterly GDP data for the US is one of the most impressive reports. If the quarterly change differs from the expected value or is above / below the previous quarter, the currency market will react with unexpected fluctuations. When the Bureau of Economic Analysis (US Department of Commerce) released its second quarter 2008 GDP report on July 31, 2008, there was a sharp rise in all dollar-linked currency pairs. The said change was 1.9%, lower than the expected value of + 2.3%. The following chart shows the hourly price action EUR / USD with a strong candle rally once the GDP report is published:

Geopolitical events

Some global geopolitical events have a significant impact on the Forex market. Wars, political scandals, elections, peace treaties, nuclear bomb tests and terrorist attacks usually result in such events with many consequences and expectations for those consequences. Currency prices respond to such events with price fluctuations that end with the end of old price trends and the formation of new long-term trends. The September 11 attacks on the United States were a major global event, followed by a series of unprecedented geopolitical events – the war in Afghanistan and Iraq, rising spending on the US war budget and an increase in financial debt in the United States. The monthly chart below shows the EUR / USD movement, this month has been a pivotal point in changing the trend from bearish to bullish. The dollar has since declined:

As you can see, the impact of news on the The Infinity APP Forex market can not be ignored. Whether you are trading in the intraday or long term, your currency positions will be affected by Forex news. This is why Forex traders should be keen to monitor all relevant news and make decisions in the market with respect to them.

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