Best Some Sucessful Tip For Forex Trading.

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Forex Trading, Trading Strategies, Forex Trading
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Overviews

• Forex Pricing Theories
• Purchasing Power Parity
• Interest Rates
• Balance of Payments
• Supply and Demand

Forex Trading, Trading Strategies, Forex Trading
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Forex Pricing Theories
This post is going to be a boring one. Im
warning you from the start. But if you do not
understand the theories mentioned here, it is
impossible to understand what is going on in the
Forex market in the long-term and you may miss
the best trades of your life. If your trading
methods are based on scalping, you should stop
reading this post and instead focus on my Forex
Calendar posts, which explain economic data
releases.
Forex Trading, Trading Strategies, Forex Trading
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Purchasing Power Parity

• I was talking to one of the traders in our New
  Zealand branch.
• Were going to import cherries. The price is
  unbelievable they want 40 NZD per kilo.
• Maybe the cherry prices are normal, and the NZD
  is priced wrong, I answered sardonically. Of
  course the cherry story wasnt a simple NZD price
  issue, but I was making a point.
• Define top requirements or restrictions

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Interest Rates

• According to this theory, investors move their
  funds to countries with higher interest rates to
  earn more money. However, this theory only works
  if all the other factors between the two
  countries are comparable.
• Carry trade mania in the Forex market brought
  the most profitable and easy money-making era
  between the end of 2000 and mid-2007 and it was
  a direct result of interest rate theory. The
  GBP/JPY pair went up from 150 to 250 AUD/JPY
  nearly doubled its value, NZD/JPY jumped from low
  40s to almost 100 in six years. During this era,
  the Japanese interest rate was 0, and the other
  three countries had an average rate of 4.5.

Forex Trading, Trading Strategies, Forex Trading
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Balance of Payments

• This theory suggests that the exchange rate
  should adjust according to current account
  surplus or deficit. In the most basic terms, if a
  countrys exports are more than its imports, its
  currency should appreciate to bring the economy
  back to trade equilibrium.

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Supply and Demand

• The basic supply and demand theory applies to the
  exchange rate also. Supply curve is determined by
  Central banks. If a Central bank prints money and
  increases the money supply, the eventual result
  will be devaluation of the currency. The demand
  curve is usually insignificant under normal
  economic conditions. However, in hyperinflation
  situations, a serious retraction is observed in
  the demand curve due to the Dollarization
  effect. Dollarization happens when people in a
  country start to save (and even spend) in another
  currency rather than the domestic one. This
  decreases the demand for the domestic currency
  significantly and causes devaluation.

Forex Trading, Trading Strategies, Forex Trading
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Forex Trading, Trading Strategies, Forex Trading
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