Forex Trading Methods Based on Stock Market Conditions
This time we will discuss about forex trading based on stock market conditions. You must already know what is meant by the stock market? if you don’t know, please read our writing first about what stocks are ! before we go on to a deeper discussion.
So the point is that the stock market we can use as a measure of forex market conditions as well because both markets are directly related once and usually the movements of the two markets move simultaneously so that by knowing the condition of the stock market we can also predict where the next forex market will move.
We need to know and understand together that if we want to buy local shares that are in a country, for example Indonesia, then we must have an Indonesian currency, namely Rupiah, as well as when we want to buy shares in Australia, then we must have that country’s currency namely the Aussie Dollar (AUD).
If Americans who have US Dollars (USD) want to buy shares in the Australian capital market then they have to exchange their currency, the USD becomes the Aussie (AUD) currency in order to buy the stock. This means that the AUD currency is much in demand so the price will go up and increase if it turns out that the AUD currency purchases are increasing as the interest of Americans wants to buy shares that are in Australia.
And vice versa if it turns out that many Americans sell shares in the country of Australia because they want to move their money back to their country, for example because there is a new policy of rising interest rates, the value of the AUD currency will decrease along with the increase in AUD currency circulating in Australia. This could also occur because of the economic conditions or the political conditions of Australia itself, so that many foreign investors flocked out of the country.
So we can conclude that the stronger the stock market conditions, the stronger the currencyand the opposite effect. The weaker the stock market conditions, the weaker the currency .
So we can conclude that,
When a country’s economic growth is growing well there will be a lot of foreign funds flowing into the country because this increases the interest of foreign investors to invest their capital in the country in the form of stock purchases so that the demand for local currency will increase / increase and market even the stock will be more expensive. If you are a forex trader then you should know that conditions like this indicate that the country’s currency will also be appreciated or increasingly expensive exchange rates against foreign currencies.
Well so does the opposite.
If a country’s economic growth decreases accompanied by chaotic conditions of the country, there will be a lot of foreign investors flocking to flee their capital out of the country for fear of the alias of loss of uncertainty, so that there is a lot of stock sales in the capital market resulting in prices the capital market is decreasing because many stocks are circulating in the market and the currency is depreciating because the market volume is also increasing.
To find out the capital market conditions of each country, we can use the stock price index indicator. If you do not know about the stock price index, then you are in the right place because we will tell you what is meant by the index that we have discussed before on the list of majority stock indexes in the world .
So, if you are a forex trader then you can trade forex based on stock market conditions because the conditions of the stock market indicate the strength of the currency.