I have been following forex for about two months now and am slowly beginning to grasp the concept but something I read today threw me off.
A trader that I follow posted a picture of a substantial decline in the GBPUSD pair and posted that the reason behind the drop was due to the news of increased rail fares, around 2-5%.
I appreciate this does have multiply economics effects but I need help understanding why.
Also, if I had been told that this type of news can move a currency pair and was asked in what direction I thought it would move, I would have said up?!
Does it really matter? Are you planning on trading changes in rail fairs? The question with all of this is, can you use it to make money? If not then it doesn’t matter.
[QUOTE=“pipwhip;584168”] Does really matter it? Are you planning on trading changes in rail fairs? The question with all of this is can you use it to make money. If not then it doesn’t matter.[/QUOTE]
I began to read trading in the zone last night and your comment makes a lot of sense.
I realise that my comment could sound pretty douchey but i think its important. There is some good from attaching a reason to events, but only specific events and there needs to be a few questions asked.
Will this event happen again?
How frequenctly will this event happen?
How accurately can i predict the event?
given anwsers to 2. and 3. what is the expected return/risk of this strategy?
Some people make a living from disaster events that happen vary rarely. I get that but the variance of their returns is pretty high. I personally prefer trading smaller events more frequent events as it gives you a better risk profile and better understanding of your expected returns. If you ever want to live off your trading having predictability of income is important.
p.s. I ate a ham and cheese sandwich yesterday, GBP always sells off when i have a ham and cheese sandwich, that is likely why what happened, happened.
[QUOTE=“pipwhip;584306”] I realise that my comment could sound pretty douchey but i think its important. There is some good from attaching a reason to events, but only specific events and there needs to be a few questions asked. 1. Will this event happen again? 2. How frequenctly will this event happen? 3. How accurately can i predict the event? 4. given anwsers to 2. and 3. what is the expected return/risk of this strategy? Some people make a living from disaster events that happen vary rarely. I get that but the variance of their returns is pretty high. I personally prefer trading smaller events more frequent events as it gives you a better risk profile and better understanding of your expected returns. If you ever want to live off your trading having predictability of income is important. p.s. I ate a ham and cheese sandwich yesterday, GBP always sells off when i have a ham and cheese sandwich, that is likely why what happened, happened.[/QUOTE]
I appreciate the honesty and the logic.
Your right, I need to focus on formulating my own strategy and not get side tracked when someone makes a few pips due to a random, one of event that in hind sight wasn’t even the influential factor that lead to the decrease in the pair.
No. Train fare fluctuations will not affect the forex market one iota. They possibility could be used as an indicator of inflation, but announcements of rate changes themselves are not going cause a currency to move.
You are on the right path of learning how to trade though… News it what moves the market, just spend some time researching what news events the forex market focuses on and you’ll be able to home in on what is important.