Forex Trading News

Macroeconomic Relationships and Currency Valuations [Comprehensive Guide]

Welcome to a comprehensive guide on currency trading and macroeconomic relationships. Currencies are a macro asset class. In a previous article, we looked at currency valuation models. In this article, we’ll delve more specifically into dozens of concepts that are critical to understanding how macroeconomic factors affect currency values and how to use this knowledge […]

Currency Valuation Models: How Are Exchange Rates Determined?

Different traders have different ways of determining a currency’s fair value price. Clearly, different expectations and different motivations are what make a market. While many traders have their own decision rules and proprietary systems, there are currency valuation models and ways of looking at the currency markets that are the most common.   Key Takeaways […]

Negative Carry in Trading

Negative carry is a situation where holding an investment or trade costs you more than the income it generates. This concept is important for investors and traders to understand as it can hugely impact their overall returns and portfolio performance. It’s especially relevant in futures and margin trading, but has various other applications as well. […]

How to Turn Academic Papers into Trade Ideas

Academic papers can be a great way to not only learn, but also derive trading ideas. For example, in this article, we’ll consider the following paper and how we can derive insights and trade ideas from what’s written: The Term Structure of Covered Interest Rate Parity Violations   Key Takeaways – How to Turn Academic […]

13 Top Mistakes Traders Make [And How to Avoid Them]

Trading is largely a process of making mistakes and learning from them to get better. Unfortunately, of course, these mistakes can be very costly. As such, trading can be risky. But risky things are not inherently risky if they’re understood and controlled for. For example, flying an airplane is very risky if you don’t know […]

Creditor Surplus Countries vs. Debtor Deficit Countries (FX Trading)

Foreign exchange (FX) trading is not an easy game, with various factors influencing the movements of global currencies. One such factor is the economic status of a country, specifically, whether it is a creditor surplus country or a debtor deficit country. This article looks at the characteristics of these countries and how their respective statuses […]

Do Support & Resistance Levels Work?

Many traders rely on support and resistance levels to chart price movements and predict buy or sell signals. However, the effectiveness of this technical analysis strategy is a subject of debate. We’ll explore the broader question of whether support and resistance levels work.   Key Takeaways – Do Support & Resistance Levels Work? Limitations of […]

How to Design an Algorithm for Predicting Exchange Rates

Designing an algorithm for predicting exchange rates involves a series of steps that integrates knowledge in finance, economics, math, programming, and machine learning.   Key Takeaways – How to Design an Algorithm for Predicting Exchange Rates Incorporate Relevant Variables: Include key macroeconomic indicators like interest rates, inflation, GDP, and political stability, as they all influence […]

Currency Risk Premia

Currency risk premium refers to the additional return a trader or investor demands for holding a currency that may depreciate against their home currency. This concept is important in international finance and investing. The risk premium is influenced by various factors:   Key Takeaways – Currency Risk Premia Currency risk premia reflect the potential return […]

Currency Overlay – Strategies & Instruments

Currency overlay is an investment strategy employed by institutional investors to protect their portfolios from currency fluctuations. The currency overlay manager first identifies the currency risk exposure of the portfolio, and then enters into currency hedging transactions to offset that risk. Currency overlay can be used to hedge both: currency risk arising from investments denominated […]

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