What makes forex go up and down

This is a discussion on What makes forex go up and down within the Economic & Fundamental Analysis forums, part of the Methods category; Hey guys. I'd like to know what moves currencies up and down. What are the factors that move it I ...

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Old Feb 3, 2011, 6:13pm   #1
Joined Jul 2008
What makes forex go up and down

Hey guys. I'd like to know what moves currencies up and down. What are the factors that move it I know interest rates is 1 but what are the others? I want to kinda know where the trend is heading economically!
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Old Feb 3, 2011, 6:59pm   #2
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Re: What makes forex go up and down

Do some reading on macroeconomics. Those are the main factors.
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Old Feb 3, 2011, 7:16pm   #3
 
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Re: What makes forex go up and down

more buyers than sellers
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Old Feb 3, 2011, 7:21pm   #4
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Re: What makes forex go up and down

I am the sole reason the market moves despite what you hear. When I buy the market immediately falls, when I sell the market immediately rises. Rinse & repeat.

Peter
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Old Feb 3, 2011, 8:15pm   #5
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Re: What makes forex go up and down

fmjvertigo123 started this thread What's with all bull**** answers by some people on this forum. Got anything else better to do? I appreciate the good feedback from most people though!
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Old Feb 3, 2011, 8:21pm   #6
 
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Re: What makes forex go up and down

Quote:
Originally Posted by fmjvertigo123 View Post
Hey guys. I'd like to know what moves currencies up and down. What are the factors that move it I know interest rates is 1 but what are the others? I want to kinda know where the trend is heading economically!
Supply and demand affects it a bit.


Also various countries competing in quantitative easing.


PS Quantitative easing - an unconventional monetary policy used by some central banks to stimulate their economy.
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Old Feb 3, 2011, 8:23pm   #7
 
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Re: What makes forex go up and down

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Originally Posted by fmjvertigo123 View Post
What's with all bull**** answers by some people on this forum. Got anything else better to do? I appreciate the good feedback from most people though!
ur mum
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Old Feb 3, 2011, 8:37pm   #8
 
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Re: What makes forex go up and down

Pin bars, trend lines and Head & shoulders patterns. Not to mention the cup and handle.
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Old Feb 3, 2011, 11:45pm   #9
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Re: What makes forex go up and down

Im reading a great book called 'Day Trading the Currency Market' by Kathy Lien. It teaches you alot about FX in general, im only getting into fundamental analysis myself as a beginner so i dont know much. I want to learn it as much as I can though and use it side by side with price action patterns.
Heres a quote from the book, maybe you could look into each of these...

Quote:
There are seven major models for forecasting currencies: the balance of payments (BOP) theory, purchasing power parity (PPP), interest rate parity, the monetary model, the real interest
rate differential model, the asset market model, and the currency substitution
model.
It then goes on to discuss each one.
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Old Feb 4, 2011, 2:12pm   #10
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Re: What makes forex go up and down

fmjvertigo123 started this thread so is it just purely on supply and demand right? if a new rule came out that the unemployment rate went up thats a good thing, this would trigger people to buy that currency. is purely on when people buy alot more.

so am i right in thinking, if most of us had the same trading system to buy on a certain indicator, this system would be absolutely correct more often than not?

so that means macro economics are just indicators, another system that make people want to buy into that currency. if you combine a few different systems where you feel are the most popular ones, you would be right more often than not?

feed back welcome
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Old Feb 4, 2011, 5:26pm   #11
 
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Re: What makes forex go up and down

Quote:
Originally Posted by fmjvertigo123 View Post
Hey guys. I'd like to know what moves currencies up and down. What are the factors that move it I know interest rates is 1 but what are the others? I want to kinda know where the trend is heading economically!
Try this book:

http://www.amazon.co.uk/Currency-Tra...6839322&sr=1-1

It may not answer all your questions, but it will help to some extent. Might be cheaper on amazon.com and/or marketplace.

Congratulations on being intelligent enough to ask the question.
Some people never get beyond "Because it bounced off support and is now crossing the 55 EMA....etc". Technicals have their place, but it's better to see the big picture, IMHO.

Bear in mind that there are long-term, medium-term, and short-term factors.

It is sometimes said that Fundamentals affect the long-term, sentiment the medium-term, and technical factors the short-term. But of course, there is more to it than that.

One thing to be aware of is risk-appetite versus risk aversion. The market tends to swing from one to another, and back, and the reasons are not always entirely rational, and are often contradictory. That's what makes it such "fun", and why some people say "you can't trade on this stuff. Price tells me all I need to know". Well, price tells you a lot, but I don't think it is all you need to know.

Another thing to consider is that it's not always the fundamental factors that move the market, but the reaction of market participants to those factors. So for example, a central bank may raise interest rates, and in theory this should be good for the currency of the country whose central bank it is. But if the judgement of "the market" is that the bank or government isn't actually serious about tackling inflation or other problems, then it might not, and might even have the opposite effect. Similarly, if the market was expecting a .5% rise and it only got a .25% rise, that might also weigh on the currency.

....etc.


Good luck.


p.s. "Lulz" is part of life here. It relieves the boredom between trades. Try not to rise to it.
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Old Feb 4, 2011, 5:39pm   #12
 
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Re: What makes forex go up and down

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Originally Posted by fmjvertigo123 View Post
so that means macro economics are just indicators, another system that make people want to buy into that currency. if you combine a few different systems where you feel are the most popular ones, you would be right more often than not?
I believe there are systems out there that attempt to trade "off the news", i.e. read the results of the various scheduled economic news reports and make instant trading decisions based on them. These will be massive systems owned by investment banks and hedge funds, etc, and (not being patronising) are not for the likes of me and you. That's why you get news spikes.

There are intelligent ways of trading the news that don't depend on supercomputers and instant digital newsfeeds, but of course you are never going to compete with the big boys, and should never try. Not for beginners, obviously.




Haven't read the Kathy Lien book, but I have heard that she is good.
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Old Feb 5, 2011, 2:45am   #13
 
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Re: What makes forex go up and down

Quote:
Originally Posted by fmjvertigo123 View Post
Hey guys. I'd like to know what moves currencies up and down. What are the factors that move it I know interest rates is 1 but what are the others? I want to kinda know where the trend is heading economically!
Re: interest rates: you might find the video here interesting:

http://www.ecb.int/ecb/educational/m.../index.en.html

(and some other information on that site). Check out also Libor rates.

Regarding that book I recommended, to try to be even-handed, there are some negative reviews of it on amazon. One of the negative reviewers reviewed another book about bonds & interest rates, which is relevant to Forex traders. It looks quite good actually, and I want to get hold of it:

http://www.amazon.com/Strategic-Bond...cm_cr-mr-title

The negative reviewer is called Jackal:
This is the link to all of his reviews:

http://www.amazon.com/gp/cdp/member-...stRecentReview
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Old Feb 5, 2011, 12:13pm   #14
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Re: What makes forex go up and down

fmjvertigo123 started this thread thanks mont. your a top man. really appreciate your answers i know there is definately alot to learn in this game, i just kind of love puzzles and to work things out you know. i did a personality test the other day, it was like 200 q's. it said the career i should be in is investigation! lol. so it makes sense that i love trying to find a successful trading system, although i know theres no perfect one out there.

thanks again
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Old Feb 5, 2011, 12:18pm   #15
 
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Re: What makes forex go up and down

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Originally Posted by fmjvertigo123 View Post
thanks mont. your a top man. really appreciate your answers i know there is definately alot to learn in this game, i just kind of love puzzles and to work things out you know. i did a personality test the other day, it was like 200 q's. it said the career i should be in is investigation! lol. so it makes sense that i love trying to find a successful trading system, although i know theres no perfect one out there.

thanks again
Thanks for the kind words. Well, as you probably know, a big part of your system, whatever it evolves into being, is yourself.

Good luck!
Mike
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