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Forex Trading: US Dollar Subject to Whims of Federal Reserve

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January 1, 2018 in Economics

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Forex Trading: US Dollar Subject to Whims of Federal Reserve

As 2017 draws to a close, the financial markets are looking for the most likely trend direction in the next year.  There are several different arguments that have been used to explain what exactly is happening in the financial arena now that the stock space is surging to record highly on an almost daily basis.  

If we are dealing with the foreign exchange market, there have been some incredible trend changes ever since the Presidential elections in the US in November 2016.  To close 2017, the US Dollar was meeting heavy selling pressure against most of its major trading counterparts.  These forex trends look likely to continue as long as the Federal Reserve is taking a dovish stance on monetary policy and consumer inflation.  

Bearish Currency Market Trends

When trends in a specific currency are falling, the currency is said to be experiencing a bear market trend.  This is important because it can offer traders and investors an excellent opportunity to start short selling that currency if the conditions are right.  Currently, we might be seeing this type of scenario unfold in the US Dollar, as the currency met heavy selling pressure into the end of 2017.

To position against these trends, there is a wide variety of strategies that can be used.  One of the most stable forms of investment transaction using the Contract for Difference, or CFD.  Essentially, the basis of CFD trading lies in the fact that market prices move and that investors have the right to capitalize on these changes in the market valuation.  The differences between these two prices can be significant and this creates excellent opportunities to profit over time.

Establishing a Trading Strategy

Before any real money changes hands, it is important to have a solid trading strategy in place that will allow you to capitalize on the underlying trends that are visible in the market.  This can take some time and research to develop but when you are able to avoid the unnecessary losses that typically accompany any new trading account, these are the types of practices that can become invaluable.

There are many different trading strategy types for many different traders but there is a need for consistency in the approach that will enable you to become a successful trader that does not experiences unnecessary and excessive losses.  Currently, the trends in the US Dollar seem to be driving the market and we will continue to watch for developments in USA GDP figures in order to validate this forex trading stance going forward.

 

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