Five Keys to Predicting Forex Market Movements

Five Keys to Predicting Forex Market Movements

To profit from the fascinating world of international trade, you must have a firm grip on the key factors that affect a currency's value. When making our trades, we analyze five key factors. In order of importance, they are:

1. Interest Rate
2. Economic Growth
3. Geo-Politics
4. Trade and Capital Flows
5. Mergers and Acquisitions

The basic building blocks of Forex analysis are relatively simple to understand. Interest rates, economic growth, politics, trade and capital flows, and merger and acquisition activity are the five primary forces that move prices in the currency market. However, while the factors that drive trade are straightforward, actual currency trading can be very tricky.

To forecast the Forex market, you must be able to predict the endless interplay of each of the five forces affecting a currency pair. A currency pair typically driven by economic growth may suddenly be overtaken by influences in trade flows or short-term acquisitions. A pair that seems sure to fluctuate with interest rates may unexpectedly be held back by investors' response to political unrest.

Some investors enjoy solving the puzzle themselves -- spending hours and years analyzing the complex cause and effect relationships between a country's economics, politics, and currency strengths. Others are more interested in reaping the potential rewards, without all the hard work. If you are one of the latter, it makes sense for you to find a qualified Forex analyst and follow their lead.