Best FX Exchange Tips and Tricks for Trading Profits

Traders of all stripes — from the wizened profitable pro to the chastened newbie loser — are often at a ‘loss’ in trying to explain the logic and system of their modus operendi, “method to their madness”, if you will. Even the most sophisticated of algorithmic systems require constant tuning. Man-machine combinations, whatever their level of sophistication must continually innovate to out-smart other man-machine combinations pursuing the same fx exchange profit. This inherent multi-dimensionality means that both circumstances (physical realities) and perceptual responses (human motivation) should, in the larger sense, be continually accounted for.

Into this daunting conflagration, the individual trader should be using all the tools at her disposal, including forex converters and forex calculators. A top-notch forex broker, with rapid execution and propagation of fx exchange rates is also essential.

FX Exchange Explained

• A special mention of the role of interest rates is also warranted. When any of the 8 major central banks change their interest rates — whether in response to endogenous or exogenous economic or political causes — the delicate balance of cross-rates in existence must realign to restore an equilibrium. In general, an increase in a currency’s central bank interest rate level increases demand for that currency on the practical and theoretical levels. A change in interest rates requires new input to forex converters and forex calculators in arriving at sustainable equilibrium rates.
• Of equal importance is the inflation rate. As per forex converter, countries enjoying relatively low inflation benefit from increasing purchasing power relative to higher inflation countries. This differential translates into an appreciating currency. With the super-low inflationary regime hoisted on the world economy by the world’s central bankers since the financial crisis of 2008, this factor has been suppressed, but with the massive expansion of global sovereign debt, the resurgence of inflation is only a matter of time.
• Another critical macro-economic determinant is the current account deficit which represents the excess of imports over exports between a country (or bloc) and its cumulative trading partners. While logic determines that this ratio account cannot remain out of balance indefinitely,  the time horizon to correct it can be decades.
• Similarly, a country’s terms of trade, that is the ratio of its export to import prices, must also return to a parity, but again the process is only assured in theory, which could require years to clear at the margin.
• FX exchange traders value consistency, discipline and fortitude in an economy and one proxy for this is the level of public debt.  Particularly if the debt is owed externally, uninvited shocks can convulse an economy, and its currency worth, if collective wisdom deems it ripe for failure. While domestically owed debt can be ameliorated with money printing or government bond issuance, here again, the day of reckoning is inevitable.
• Similarly, countries with political stability and overall positive economic performance are rewarded by forex brokers and forex traders with premiums on their currency

In this article we have abstracted from the daily headlines and attempted to understand those factors which drive foreign exchange price movement