Traders today are all leaning towards the technical aspect of trading and ignoring the fundamentals. Without involving fundamental analysis in your trades, finding out the reason behind market price inflations will be impossible, and you will be left unable to place proper trades! Only through proper fundamental analysis can you, as a trader, identify why market prices are moving. This will put you in a better position while trading, keeping you abreast of the latest economic developments and be aware of how the Forex trading markets are getting influenced by the same!
Fundamental analysis is predominantly done by employing economic, social and political indicators – the most significant one being GDP (Gross Domestic Product). Markets worldwide run on the basis of supply and demand. When the supply is low but market demand is high, a price hike can be noticed; similarly, when supply is high but market demand is low, prices take a fall. GDP is an economic indicator that helps monitor markets and study the movements it sees. The market expectations that can be read using GDP have a strong influence over currency prices in Forex trading; hence making GDP one of the most important fundamental indicators.
GDP value is obtained by measuring the production made by an economy. This includes investments, private customer expenditure, exports and government expenditure. The economic growth forex robot of a nation can’t always be stable; there will always be ups and downs in the form of recessions and expansions. A nation’s central bank plays a vital role in its economic development. There can’t be a very deep recession since the supply drop and demand hike will lead to imbalance. And similarly, a country shouldn’t get too economically ahead either since it will lead to things getting out of hand. These factors are crucial and must be considered while Forex trading in the Philippines.
You might wonder as to how GDP affects Forex trading markets when there seems to be no direct link. Well, GDP fluctuations affect supply and demand, which can lead to central banks lowering or increasing interest rates, which in turn affects the country’s currency value! A big chain, but by no means trivial. As a Forex trader, the currency value is your primary concern but the GDP indicator should be a part of your Forex trading strategy. However, knowledge of the influencing factors helps greatly since you are better equipped to read the markets and are aware of future market movements.
With ample GDP knowledge, economic growth can be measured and you can speculate interest rate changes ahead of time, allowing you to continue or withdraw your trading positions. Here’s how you use GDP in Forex:
Do your homework and do it well; the information this provides will enable you to measure a country’s economic growth.
See what the central bank is doing in regards to interest rates – are the rates getting hiked or slashed?
Keep an economic calendar by your side and finalize on the GDP releases, this information should be implemented while drafting the Forex trading strategy.
For Forex trading in the Philippines, GDP knowledge is indispensable. Without being aware of the underlying market movements, finding profitable trading positions will be arduous. Pair up with WesternFX – the forex market experts, and take your trading career to new heights!