Auto Forex Trading

What’s Is Auto Forex Trading

Well, first and foremast , auto forex trading, like any form of speculation , has a goal that is more important than anything else ; making money ! If this is the premise we start out with, that our goal is to make money , then in a massive global market market, how do we do this ?

First you must decide whether you are a technical trader or a fundamental trader or both . There will be more articles coming on this topic later , but now let’s just assume you like keeping up with current events and world affairs and the fundamental side of this game is the one you’re more attracted to. Then you have to ask, what are the single most important fundamental factors that drive currency movements ?

If the fundamentals is what you’re focusing on , forex trading decisions are going to be driven by one thing above all others ; interest rate differentials between countries . You may wonder what an interest rate differential is? Great question ! Suppose there is a short term interest rate of 4% on the Australian Dollar . This means that if you’re a debtor in Australia this base rate helps to determine what you pay on credit cards, mortgages, and more . This also means that if you are a creditor you can use as the base rate this 4% short term interest rate that will determine how much interest income you make on your investments ; such as CDs from your local bank . Then imagine that the US Dollar has its short term interest rate , which is set by the Federal Reserve, which is 1%. How are currency movements affected by all this ?

If the Australian Dollar short term rate is at 4% and the short term rate of the US Dollar is 1% it’s all as simple as this : investors want their investments to have a higher yield and since Australia provides more interest they move their funds “down-under” or as the Aussies say, “down-unda mate” . This shift in the investments going to Australia from the US mean that the US Dollar will weaken because supply is larger than demand and the Australian Dollar becomes stronger because supply is smaller than demand . Basic economic fundamentals at work here ; when there is higher demand the value rises.

The next time you are thinking about your own auto forex trading and your next position, you should ask, ” what country has the most liklihood of having higher rates moving forward and what country is likely to have lower rates moving forward ?” Purchase currency that is the high interest rate favorite and sell the currency that you favor for weaker interest rates and see profits increase as investors leave currency that is weaker and go towards the one that is stronger. This is the essence of auto forex trading.