Forex tradingis now one of the largest businesses in the world. From a closed market of top financial and banking institutions it has now opened its doors to individual traders. Many are encouraged to invest in the foreign exchange market because of the high returns that they can get from it. Yet like any other investment, there are certain risks that have to be taken.
There are several risk factors in currency exchange. The market is a highly fluid one and values often fluctuate by the second. This is why traders should try to have strategies in managing the risks. It?s a good thing that risk management tools and strategies are now readily available for the use of traders.
One of the most important strategies for forex trading is to take note of the factors that affect currency values. There are three main factors. These are the political, economic and social factors.?The political factors are those affairs involving the governance of the country while the social factors include the status of the people in general but the most important among the three are the economic factors. The social and political factors also affect the economics of every country. Economic reports are regularly released by all the countries in order to help the traders.
There are various things included in economics that would indicate the rise and fall of currency values. One of these is the GDP or gross domestic product. This value indicates the goods and services produced by the country for a certain time period. The good value for the GDP is 3 and this indicates a good economic condition and this generally means that the currency will also be doing well in the market.
The consumer price index is also one good economic indicator. This shows the prices of commodities in the country for every year. This is one good indicator of currency value because it shows the inflation rate of the country. Inflation is one of the important factors that affect currency values in forex.
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Source: http://www.thestocktradinginvestment.com/2012/03/07/what-influences-forex-currency-values/
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