Trade The Journey

Trade The Journey

Economy of a Country

Learning about the Forex Market has become my main interest as I begin to find out which investments/assets best compliment my personality.

The Forex market is extremely liquid and therefore very dangerous. The market can fluctuate and losses are magnified through the leverage available in the Forex market. Each country has a currency and they trade against one another for exchange. These exchanges are for various reasons like a company transferring its international profits to profits in its domestic currency.

Learning about countries and their economies has been a bit easier than learning about companies. Learning about the economy is more of a big picture type of learning.

For instance, the US is a domestic-demand-led growth economy whereas China is an export-led growth economy. For a while, I wondered how the US could operate at a trade deficit and still prosper. Well, the trade deficit balances out with the capital (Money) that flows into the US economy.

The US economy/GDP is heavily reliant on consumer spending and consumer sentiment hence domestic-demand led growth. Which is why you should be aware of the purchasing/spending rhythm of the US economy before making any trades. This is part of the equation and the other part of the equation is understanding the other countries economy/currency you are trading against.

Visiting the Bank of Japans’ website led me to a research paper where an official in the China Finance department mentioned that Railway Cargo Volume, Electricity Consumption and Loans Disbursed by Banks are a great way to see how their Economy is doing

The next step is to see the numbers from the economic data reports released. Knowing the release dates of economic data can be accomplished through a “Economic Calendar”.Because of the recent trade war and the upcoming strife between two of the largest economies in the world, I used the US and China as examples.

In currency trading, you are both buying and selling at the same time. When you begin to expand the investments available to you through knowledge, you will begin to understand that selling and buying are not linear.

This means that the process of buying and selling don’t always go in the same direction. For example in options, you can sell before you buy and you can buy before you sell. The same kind of thinking applies than currency trading in the Forex Market.

Going back to a countries economy, another good way to learn about their economy is to study their GDP. How much does the economy produce? and what is the largest sector/areas of their GDP? What are the interest rates?

I know it sounds simple but how is the country really doing in the eyes of its citizens and is the country accomplishing the goals it has set. For example, the US economy seeks low umeployment and steady inflation.

Finally, visiting the countries Central Bank website can be a good way to learn about their economy. There are research reports and data available for you to view, for free.

Thoughts? Add-ins? Suggestions?

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