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FOREX: What Is Forex? Methods Of Prediction In Forex Market

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Forex

Foreign exchange markets provide a feasible opportunity to earn a profit from currency dynamics. However, to become a successful Forex trading broker, a trader needs certain foresight. Any expert in the field will admit that solid forecasting skills are essential. But how can these be developed? Here is a concise instruction to help you start.

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What is Forex?

Let’s begin with a correct definition of the market in question. In simplest terms, this is a marketplace where currencies are bought and sold, while traders gain profit from the differences in exchange rates. This market is not only international.

It is also the biggest one in the world, with daily transactions to the tune of trillions of US dollars. The traders and brokers form just one group of participants in Forex trading, and they operate alongside finance institutions: international banks, businesses, hedge funds, and others.

Unfortunately, making an accurate prediction is not easy. There is no universal formula to help you. To understand the foresee the movements of currencies, like stocks, a trader has to be aware of multiple factors at play, related to both micro and macroeconomics.

A reliable broker like Alpari provides professional guidance, educating their traders on all the important factors. These include the following:

  1. Growth of economies
  2. Stability of political systems
  3. Geopolitics
  4. Monetary policies of countries
  5. Imports and exports
  6. Interest rates
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Traders from Nigeria must steer clear of websites that promise to supply you with insider Forex predictions free of charge. Their data is inaccurate and unreliable. Instead, get a Forex Calendar. This tool facilitates monitoring of economic data, including announcements and forecasts, as well as other pertinent information.

Key skill: trend spotting

The ability to spot and follow trends is vital for anyone determined to make money on Forex. Basically, a trend shows the direction of an asset on the market or the marketplace in general. These may be short-term, intermediate, or long-term. Focus on three major types of trends:

1. Uptrend (this currency is gaining value),
2. Downtrend (the opposite is true) and
3. Sideways trend (this currency is stable).

Trend-based trading is the most reasonable approach, which is confirmed by Alpari. When you notice the foreign exchange market going up, you should foresee its future movement in the opposite direction, and make your choices accordingly.

Two Basic Approaches

Although there are more ways to assess the condition and prospects of the market, these two are absolutely crucial. Traders in Africa, like elsewhere, may go with either of the following, or both. Here is a look at the specifics of each method.

Fundamental

Some local indicators considered within the framework of this approach are: GDP, inflation rate, the pace of economic growth, and production. As a result, a trader understands geopolitical and economic conditions affecting currency dynamics.

Technical

This approach is based on the evaluation of past data to predict future trends. Since patterns tend to repeat themselves. Hence, these signals help foresee what is to come.

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