Knowing Your Forex Pairs
In this article, we will discuss a few key pointers that every Forex trader needs to know about his or her currency pairs. So let me start by asking you a few questions… How well do you know your pairs; EURUSD, GBPUSD, USDJPY?
Seriously how well?! Do you know what happened 2 weeks ago with cable? Or why the Euro gained so much strength over the past week? Or what price your favorite pairs are sitting at right now??
If you don’t, then ask yourself why not? Because here’s the thing about trading the Forex markets or any other market for that matter, information is crucial. The very best traders in the world know their pairs INSIDE OUT!!!
It comes naturally to them and it should to you too! At some point, trading needs to flow because you understand the pair’s movements and what is going on around you. That’s how fundamentals and technical’s align.
Here is why I say that – so you don’t get caught off guard by an economic event or a global pandemic. Because when you are caught off guard the probability of you making rookie mistakes are often high and this may cause a severe negative slope on your equity curve, if not… an entire collapse of equity. This may leave you questioning whether or not Forex trading was the right career path to follow.
The currency pair matters!
You might be wondering what there is to know about your favorite Forex pairs? There is a lot to know and all this information can be found through research or countless hours on the charts, for example; understanding how the Canadian dollar is affected by the supply and demand of Brent crude oil, or how certain dollar pairs move alongside gold prices.
All this information is important because it helps you gain an edge, it could even help with the mental and emotional pressures of trading when you’re able to put the pieces together, also known as confluences in the Forex market.
What should you consider?
Now let us chat about a few key factors a Forex trader needs to know about the pairs he or she trades. Firstly, it is important to know the different influences on a pairs price fluctuations as well as the events that may cause bullish or bearish momentum.
For example; if we take a look at the EUR this past week and a half and dig in deeper as to why there was sudden bullish momentum although key levels were hit, we realize the German Chancellor Angela Merkel reported that the ECB would be introducing a stimulus package of up to €130 billion, to get the German economy back on its feet and running again (restoring investor confidence)
Furthermore, if you had known that Germany has the biggest economy in the Euro Zone due to all the manufacturing done in the country, this would have given you clues as to where money would flow and how to trade accordingly.
Here are several influences on currency pairs:
- Interest rate decisions (Central Banks)
- Unemployment numbers. (NFP – because it translates to the growth rate of an economy as well as the job rates at a particular time)
- Fiscal policies and monetary policies
These all affect price!
So what am I saying to all Forex traders? – It’s simple. Know your pairs’ historical movements so that you give yourself an edge in this present moment. Know why central banks make decisions to raise and lower interest rates and try, by all means, to understand what that does to the pairs you trade.
Treat the Forex markets like your own personal business, because it is – when you take it seriously, you will realize that the pairs you trade are like your employees. If you don’t know your employees well, you will never realize your business’s full potential.
In conclusion, knowing your pairs only serves you, your soldiers, and hopefully your pockets. Learn everything there is to know about the Forex pairs you trade and soon your soldiers will come back with more profits.
Happy trading Traders!