Importance of Fundamental Economic Analysis

Forex trading is a complicated business. A number of factors make the Forex market unique. Firstly, such market operates 24 hours a day, 6 days a week. Secondly, usually the traders in the market generate low profit margins. Thirdly, this is a useful way of diversifying the investment portfolios of FX traders.

Since 1970’s the banks and both large and small institutions and investors participate in the market. The beginner should join a forex trading course to know the basics about the complex world of currency trading and to learn the various strategies for such trading.

For being successful in it, foreign exchange trader must take into account the "fundamental" factors of a country's economy. Firstly, they include political positions and developments of a country. The other factors are the decisions made by a country’s central bank or any relevant piece of economic news that affects the country.

A country's GDP, employment rate, trade balance and most recent budget are the three factors the trader needs to consider about the economy of a country. The results are important to determine or predict the direction and extent to which the official interest rate of a country may change. If he predicts the fall in interest rates, he sells the currency of the country and if the opposite happens he buys the currency of the country. Large investors sometimes funds industrial development in a country if they find country's currency is weak and sells back that country's currency at a higher rate when the opposite happens.

So, to do better in forex trading, the trader needs to master how to conduct a fundamental economic analysis and how to react to this to ensure maximum profit.