Interest rates, which are set by a country’s central bank, are a major factor in determining the relative value of a currency. If investors can realize significantly higher gains from money held in interest-bearing accounts in the United States than from interest-bearing accounts in other countries, then that makes the US dollar more attractive and, therefore, likely to increase in value relative to other currencies.
Many forex traders favor technical analysis in determining the trading positions they adopt. Technical analysis – analysis based on charts of price movements in a market with the aid of various technical indicators – is generally favored by speculators and short-term or intraday traders, although long-term traders may also utilize technical analysis.
Technical analysis is simply analysis that is based on past price movement and market behavior (such as volume or volatility). Technical indicators include trend indicators such as moving averages and market strength or momentum indicators such as the relative strength indicator (RSI).
A basic technical trading strategy might be something as simple as buying a currency pair when the price/exchange rate is above a 50-period moving average, and selling the pair when it is below the 50-period moving average. Some technical traders utilize a single technical indicator for trades, while others apply multiple technical indicators as trade indicators. For example, the simple technical trading strategy just outlined, using a moving average, might be combined with a momentum indicator such as the MACD, with trades only being initiated when both certain price levels and momentum levels exist.
Technical traders analyze charts of varying time frames based on the trader’s individual trading time frame preference. Traders who make very quick, in-and-out of the market trades may concentrate their analysis on a 5-minute or even 1-minute time frame chart. Traders with longer-term trading time frames are more likely to apply technical analysis to hourly, 4-hour, or daily charts.
Many forex traders favor technical analysis in determining the trading positions they adopt. Technical analysis – analysis based on charts of price movements in a market with the aid of various technical indicators – is generally favored by speculators and short-term or intraday traders, although long-term traders may also utilize technical analysis.
Technical analysis is simply analysis that is based on past price movement and market behavior (such as volume or volatility). Technical indicators include trend indicators such as moving averages and market strength or momentum indicators such as the relative strength indicator (RSI).
A basic technical trading strategy might be something as simple as buying a currency pair when the price/exchange rate is above a 50-period moving average, and selling the pair when it is below the 50-period moving average. Some technical traders utilize a single technical indicator for trades, while others apply multiple technical indicators as trade indicators. For example, the simple technical trading strategy just outlined, using a moving average, might be combined with a momentum indicator such as the MACD, with trades only being initiated when both certain price levels and momentum levels exist.
Technical traders analyze charts of varying time frames based on the trader’s individual trading time frame preference. Traders who make very quick, in-and-out of the market trades may concentrate their analysis on a 5-minute or even 1-minute time frame chart. Traders with longer-term trading time frames are more likely to apply technical analysis to hourly, 4-hour, or daily charts.
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