The goal of Forex trading courses is not to turn you into an economic guru, but rather to give you the knowledge and skills necessary to be a savvy Forex trader. Therefore, this article will not delve into the deep dark depths of economic theory. Instead, it will present the basics so that you can make the most of your training as you work towards your goal of being a successful Forex trader.
So you understand the basis of the Forex market. You know that currencies are traded one for another. You know that rate fluctuation between those currencies is what creates the opportunity for money to be made. But what causes currency rates to fluctuate?
A great deal of it has to do with trust. Just as stock value can go up or down based more on people’s perceptions of the company than actual company earnings, currencies can change value due to the confidence that the world market puts into a country’s economy and the continued strength of its currency. This perception is based on many factors, some definable and some less so. Some of these factors include the strength and stability of the government, the productivity of a country as a whole, and inflation within the country.
The government of a country has a great deal of direct control in the value of currency. By changing interest rates within the country, they can affect the value of currency. Currency value also is based on supply and demand. As more people seek to purchase a currency, the value of the currency increases. The reverse is also true. If everyone is trying to sell, the value will take a dive.
These factors relate to each other is a very complicated way. It is impossible to create an algorithm to consider all these factors and determine what a currency will be worth. This is one of the reasons why Forex trading courses can be so valuable. A good Forex trader learns to take into account the less measurable factors (stability, world market confidence) as well as more tangible factors (chartable trends in currency value) when making his decisions.