When you are trading in Forex, you are effectively investing in the economic well-being of a nation in comparison to another nation. So if you sell British Pounds for US Dollars, you are betting that the US economy is going to do better than the UK one.
But what are the factors that can influence a nation’s economy? There are the obvious financial indicators such as a nation’s gross domestic product (GDP) and Consumer Price Index (how much basic items cost which affects the spending power of the country’s population). However, the main factors in currency value fluctuation are current affairs. These are not just political developments but interest rates, leading companies in the country releasing their figures, and general financial developments. The weather can also have a substantial impact on currency value; Japan’s recovery from recession has been severely hampered by the tsunami and earthquake the country suffered in early 2011.
When these events take place, brokers will send out their traders an alert via their Forex trading platform to their clients so that they can make an informed decision on their position. Traders can also subscribe to a range of news feeds via RSS feed (online) or SMS (text message) so that they are receiving information from a number of sources. This means that the risk of false signals is reduced because receiving the same information from different sources makes it more robust and so traders can be more certain that they are making decisions likely to increase their profits.
