One of the great things that I love about the forex market is that it requires a bigger picture view than other types of investing and trading. You not only do you have to understand how specific markets or exchanges work, but you have to understand how they all work together as one big market.
You have to know how political situations in one country affect the stock market in another country and how that affects not only the trading pairs of the countries involved, but how it affects the other currency pairs.
For example, when there is a global economic recovery like the one you see now, you will see a surge in commodity prices. Whenever there is a global economic recover, companies begin to buy up raw materials to produce the goods that the world will start to buy in the recovery. That means everything from oil to copper will surge.
So that means you will see the commodity prices go up, which makes the futures of those underlying commodities go up. You will also see the exchanges in countries that are commodity rich, like Canada, go up.
As both commodities and local country exchanges rise, so will their currency. And that is exactly what you see happening right now. The CAD/USD is on the rise, driven by commodities.
A significant part of forex investing is knowing how the global economy works. It’s a game of understanding the big picture and know how to act on it. It’s also about knowing when the big players will enter the market.
That is why the forex market is one of my favorite markets to analyze. It requires a larger picture and macroeconomic analysis goes a long way here. You can test different predictions of these global movements with a forex trading demo or you can just see it unfold before you. And it’s super exciting when your hunches are proven to be correct.
