You can invest in a broad basket of currency pairs to diversify any risk posed by the other currencies. If a rate hike is announced in the December meeting, then the dollar will climb higher. The central banks will hike rates in order to curb inflation, and cut rates to encourage lending and inject money into the economy. National Bank of Romania. The amazing thing is I used to get caught out by surprise as I did not know what was coming into the market. In some cases, I would have been in profit and was happy with my profits and then all of sudden, my profits gets wiped out by the quick lightning speed market movement.
advantages of the interest rates forex trading strategy You can get pips profit in a matter of minutes this can have the potential to increase your forex trading account fast.
Who controls the interest rates and why they move?
The only way to be aware of when these forex news come out is by having a forex economic calendar. The forex economic calendar tells you when, what date and time, a major currency news is going to be out so you will not be caught by unexpected market movements when that happens.
Here is a forex trading strategy which you can use to trade the interest rate news announcements. Could you please like, share, tweet, email etc if you like this by clicking the links below? Mail will not be published required. Interest Rates Forex Trading Strategy One of the major forex news that comes out each month is the interest rate. If a country raises interest rates over a long period of time, this can cause an extended trend against other currencies.
Money just continues to pile into these currencies until there is any indication that the party might end soon Forex interest rate announcements are some of the big currency market moving news every month. The concept and the trading rules fore the interest rate trading strategy are really simple: Here are the interest rates forex trading strategy rules: Now, why would you take two opposite orders a few minutes before the news?
The spread usually tends to increase significantly before the interest rate numbers comes out, therefore getting in a bit early allows you to avoid having to pay for so much spread and another reason is if you get in a bit early, and hopefully you get in mid range, your stop losses would be roughly half that of the range in pips instead of like the non farm payroll trading strategy where your stop loss would be equal to or slightly little bit more than the range.
Place you stop loss at least pips outside of the range. For take profit target: The idea is that whichever profitable trade that results will be sufficient to cover the loss of the other side trade and still give you a reasonable profit.
Wider forex spreads during interest rate news announcement can also knock out your stop loss. Be that as it may, the U. So the better question might to ask if now is the right time to invest in the U. Unlike stock trading, currencies are traded for more than a mere purposes of buy and hold.
Currency traders buy currencies at the present price and sell for future delivery. In other words, multi-nation corporations who trade currencies trade today for settlement a week to many months in the future.
This way they can hedge against the inflation. Just like banks offer certain interest rate on deposits made with them countries also offer different currency interest rates for buying their currencies. This is similar to depositing your money in a bank but in this case, you will be depositing your money in a certain country. A multi-nation corporations like Google Inc. Google employees in Europe are paid in Euros.
This exchange rate fluctuates daily. Unless the Euro slides drastically against the U. Moreover, if Euro gains against the U. A nation's currency interest rates influences traders, investors and multi-national corporations to buy the currency with higher interest rate either for long term investment or for hedging purpose.
As a result, demand for high yield currency will drive exchange rates higher compared to the low yielding currencies.
Depending upon the political situations and economic announcements investor risk aversion factor varies from time to time, which significantly influence forex rates. As of April 7, Greece is undergoing serious budget crisis.
Euro zone and ultimately Euro is heavily influenced due to Greece's economic health concerns. Even though countries like Germany and France, which make up the majority player in Euro zone, do not like to take Greece's problem in their shoulder, but still Greece's headache is Euro zone's headache.
What are interest rates?
Interest Rates Forex Trading Strategy One of the major forex news that comes out each month is the interest rate. You can either trade interest rate using the non farm payroll trading strategy. READ Forex Trading Strategy For Trading The Middle Bollinger Band The red arrow is 3 weeks before the rate announcement and it’s obvious that traders (and others) were listening as that is the largest momentum candlestick we’ve seen in over a year. How to Trade Forex Interest Rates. When trading the world's $5 trillion forex market it doesn't have to be complicated. However, it is important to know what moves the market and why. After all, as a forex trader you need movement in the market to make decent profits; and generally, the bigger the better.