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Currency trading is affected by the implications of the many other trading markets. The New York time between 3:00 PM EST to 7:00 PM EST is best suited for scalping with the counter trend strategy. Off hours between 3:00 PM and 7:00 PM EST is when all the world banks are closed. The U.S. banks are closing their doors and the Asian banks have not yet opened. This is a great time to scalp the market using a counter-trend strategy, because no larger banks are moving money (i.e. the markets) at that time. Just as with the London close, there is no set way in which the New York afternoon market plays out. On more active days where prices have moved significantly, the lower liquidity can cause additional out sized price movements. If your involved in currency trading you should be aware that lower liquidity conditions tend to prevail and adapt accordingly.
Why do investors need to exchange their domestic currencies for foreign currencies?
Many want to invest in foreign assets. For that they need to convert their domestic currency into foreign currency. Companies involved in import and export business need foreign currency to keep their business transactions moving. Multinationals need foreign exchange to repatriate profits. Big banks need foreign exchange and the list goes on.
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The forex market does not exist in a vacuum. Trading in the forex market can yield high returns and now with the powerful Forex Trading Robots the market is open to just about anyone. You may have heard of other markets that exist like the gold, stocks, bonds, oil, futures and commodities all these markets and their movements should be taken into consideration when your involved with currency trading.
Does The Forex Market Have Any Relationship or Correlation Between The Other Financial Markets of The World?
Every financial market will react to any number of economic triggers and each markets reaction is typically based on how they choose to interpret the news not only on a local front but globally as well. There is no one sure answer to this question as the reactions of one market to a particular world event may mirror that of another market on one occasion and yet in a similar case the two markets may react in two very distinct and opposite ways. When your dealing with currency trading due to its volatile nature you could certainly always find some correlation between two financial markets over time. As a trader being involved in a number of markets I always bear in mind that each individual market is just that individual in and of itself.
Currency trading can be highly lucrative and a good trader will always keep an eye on whats happening in the other markets as well. In fact there is a theory that in the 21st century, savvy traders will keep on shifting their investments from one market to another to maximize their returns. In other words, they will follow the money trail. Lets discuss some major financial markets and see what conclusions we can draw for currency trading. Its always important to be aware of whats going on in the other financial markets.
The Gold Market; Buying and Selling on Value Based Decisions!
Gold is considered to be an alternative to the US Dollar and a hedge against inflation. Gold is commonly viewed as a store of value in times of economic and political instability and uncertainty. If you deal in currency trading it is in your best interest to keep up to date with what is going on with the price of gold and its relation to the value of the US Dollar.
Gold prices have been rising for the last two years. There is an uptrend in the gold prices. Many investors are flying towards safety and investing into gold as a hedge against deflation and the present financial crisis. A weaker US Dollar is generally accompanied by higher gold prices and a stronger US Dollar is accompanied by lower gold prices. Over the long term, the relationship between Gold and US Dollar is mostly inverse or negative.
In the short term, the relationship between gold prices and US Dollar may not be as solid as it has been historically in the long term. This makes short term relationship between the gold prices and US Dollar generally tenuous. However, in the short term, each market has its own dynamics and liquidity. Overall, the gold market is much smaller than the forex market. There is only a limited and finite quantity of gold. No major gold mine has been discovered in the past many decades. Only the discovery of a major gold mine can bring the prices of gold right down.
If you are a currency trader than it is not difficult for you to trade gold also! Al most the same technical analysis tools are used in gold trading as in currency trading. Extreme movements in the gold prices tend to attract currency traders attention and usually influence the US Dollar in a mostly inverse fashion. At the same time, gold traders tend to keep an eye on whats happening to the US Dollar.
The Value and De-Valuation of The Oil Market!
A lot of confusion is usually spread on the relationship between oil and US Dollar and other currencies like CAD and JPY. Correlation studies show no appreciable relationship to that effect in the short run which is where most of the currency trading is focused. The idea behind these theories is that if the country is an importer of oil, its currency will be hurt by the higher oil prices and helped by lower oil prices. If your involved in currency trading you should absolutely keep these simple yet complicated situations at the forefront of your mind.
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