The Australian dollar has resumed its recovery against the US dollar. AUD/USD has risen to 0.7471, up 0.80% on the day. The pair is at its highest level over last 4 months.
The RBA minutes reiterated the old familiar message from the central bank that the economic conditions for a rate hike will not be met before 2024. The minutes also showed that the RBA expects the economy to grow in the fourth quarter, following a contraction in GDP in the third quarter. The minutes were relatively dovish, particularly with regard to the RBA’s interest rate policy.
Although inflation is slightly below the RBA’s target, this could change as some Australian states have eased restrictions on covid related closures. In addition, major central banks, led by the BoE, are showing a tendency to tighten monetary policy and the RBA may have to follow suit and bring forward its plans to normalise monetary policy. The AUD has risen on the expectation that the RBA will change its rate outlook, perhaps as early as this week. If this is the case, AUD/USD could continue its rally and move towards the 0.76 line.
The Aussie is also benefiting from improved risk sentiment on Tuesday as the US dollar trades broadly lower against Asian currencies as well as the euro and sterling. Higher coal prices have also boosted the Aussie dollar. China is turning to coal to ease energy shortages, which is good news for Australian coal producers.
Forex trading is a term used to describe people involved in the effective exchange of foreign currency, usually for the purpose of profit or financial gain. That could take the form of speculators, who want to buy or sell money for the purpose of profiting through the price movement of money; or it could be a fence aimed at protecting their accounts in the event of a breach of their financial position.
The term ‘forex trader’ can refer to each trader in the trading platform, a bank trader using their institutional platform, or hedgers who may be carrying their own risk or withdrawing that activity from the bank or financial manager to manage the risk on them.
The foreign exchange market, or forex (FX) for short, is a low-level market place that enables the buying and selling of various currencies. This happens over the counter (OTC) instead of the intermediate exchange. Unbeknownst to you, you may already be participating in the foreign exchange market by ordering imported goods such as clothing or shoes, or, more likely, by buying foreign currency while on vacation. Traders can be drawn into forex for a number of reasons, including:
FX market size
Different types of trading currencies
A different level of flexibility
Low transaction costs
Trading 24 hours during the week
TRADE OF PAIRS One unique feature of the Forex market is the way prices are quoted. Because money is the foundation of a financial system, the only way to extract money is through other currencies. This creates a harmonious equation metrics that may sound confusing at first. Forex trading in pairs gives the trader some flexibility, allowing the trader or investor to express his or her trading in the currency he or she feels most appropriate.
Let’s take the Euro for example, and let’s say the trader has good intentions for the European economy and thus would like to make long money. But – let’s say this investor is also strong in the US economy, but bearish on the UK economy. Yes, in this example, the investor is not forced to buy the Euro against the US Dollar (which could be a long trade of EUR / USD); and, instead, they can buy the Euro against the British Pound (long EUR / GBP goes).
This gives the investor or trader that extra flexibility, which allows them to avoid ‘missing’ the US Dollar to buy the Euro and, instead, allows them to buy the Euro while they are short of the British Pound.
CHURCH TRADE: BASE V / S COUNTER CURRENCIES One important difference of the Forex rate is the meeting: The first currency listed in the rating list is known as the ‘basic’ currency of the two, and this is the quoted asset. The second coin is known as the ‘counter’, and this is the standard currency, or currency used to define the amount of the first coin for the two.
LET’S TAKE EUR / USD AS AN EXAMPLE
The Euro is the first currency on the scale, so the Euro will be the primary currency in the USD / EUR currency pair.
The US Dollar is the second largest currency, and this is the currency used by the EUR / USD quote to define the Euro value.
So, let’s say the EUR / USD average is 1.3000. That would mean 1 Euro costs $ 1.30. If the price goes up to $ 1.35 – then the Euro would go up in value and, basically, the US Dollar would go down in value.
If an investor was bearish on the Euro but strengthened the US Dollar, they could choose to ‘shorten’ the two, expecting prices to fall; after that they could ‘cover’ the trade by buying it at a lower price, and then put the difference in the pocket.
TRADE OF CHURCHES In short, the foreign exchange market works like many other markets because it is driven by supply and demand. Using a basic example, if there is a strong demand for the US Dollar for European citizens holding Euros, they will exchange their Euros for Dollars. The value of the US dollar will rise while the value of the Euro will decline. Keep in mind that this transaction only affects the EUR / USD currency pair and will not, for example, cause the USD to depreciate in the Japanese Yen.
Whether it is forex trading or any other form of trading which involves highs and lows, the trader’s mindset plays a vital role in his moves. Abrupt and instinctive decisions may not be fruitful in the long run as it is not a lottery. Proper analysis and strategy are required to become a successful trader.
Every move in the forex market will either benefit you or prove to be a loss for you. It can be quite stressful to handle all ups and downs but if you are really into trading and want to make it work, you should set up your mind in that way.
Trading psychology involves all the emotions that a trader experiences when he is either about to make a crucial decision or when he has gained or lost in the market. The most prevalent emotions that every person dealing in trading will experience are fear, anxiety, nervousness, and greed.
Fear is a constant feeling when you are trading either in forex or in shares. You don’t know what the coming time is going to bring you. You may make a decision and would be frightened about the results. This may keep you away from making the right decisions and giving all that you have learned a try. So, it is important to overcome your fears and make stable and sensible decisions. In our perspective, a person fears something he is not good at or something he is not completely aware of.
We suggest you completely know about all the basics, the tools of technical analysis, and the various strategies that can be deployed in the forex market. Once you are aware of all the possibilities of your moves in the market, you will automatically observe that the fear recedes away.
There are times in the trading market when you have to decide in a very short time. You don’t get to think for some hours, it is a matter of some minutes. In that case, you encounter feelings of nervousness and anxiety. When we have to make decisions in a very short duration of time, it is possible that we make decisions without thinking properly or maybe very instinctive decisions. We cannot completely avoid this situation and we need to get used to it.
A trader should keep an eye on the market and the trends even when he is not placing an order. If you know what has been going on in the market before and you are already predicting some things for the near future, it becomes easier to make decisions in a short interval of time.
Greed and excitement are the two emotions that will arise when you think things are going well and will continue to go on a high note for some time. You may want to make the most of the time and exceed your limits. This is a situation in which you need to handle your emotions and stop yourself from incurring huge losses. A trader tries to buy more and more in such a situation and forgets about the counter effects that can have on his account.
To handle this emotion, a trader should put a limit on the number of pips he can afford to lose and stick to it. Whatever comes up, always stick to the strategy you have formed for the long run. Making huge profits at once is not a viable expectation and one should believe in shorter steps and consistent profit rather than abrupt and huge profits.
Awareness of the pros and cons is very important for a good trader. Even an experienced trader loses money at some time or the other, these outcomes should not have an impact on the confidence of the trader. Uncertainty is an unavoidable part of the forex market. A good trader should be mentally ready to incur any loss.
While you place an order, do the analysis and look at both sides of the coin. Estimate the amount of profit you may get and then estimate the amount of loss you may have to incur. Do not make instinctive decisions hoping that the things will turn in your favor only, the reverse can happen as well. So, it is better to prepare yourself for the loss and then make a move. Profits and losses are like the two sides of the coin in trading. A good trader remains mentally stable regardless of the outcomes of his trade.
A trader who is new to the forex market is most likely to incur huge losses if they are not proceeding with caution. Prevention is always better than cure. Most of the people move into the trading area with the thinking that they will convert their $1000 into $1000000 anytime soon. Some may make the mistake of investing all the input they have at once. All this happens due to a lack of experience and ambiguity of the basics of forex trading. Blowing up all your account balance just to make one trade is a big no. Look for a reasonable and sensible strategy and its yields before you starting making purchases in the market.
Along with the basics and trend analysis of the forex market, a trader should learn risk management as well. There are many risk management moves and strategies that one should know about and follow. Using stops and limits and familiarizing yourself with the concept of leverage may be a good start.
If you are new to the forex market, we suggest you set up a demo account for a while and get a good grasp of the market before you start risking money. Stay updated about the news and events to make wise and informed decisions.
