All game on Forex develops depending on the price movement. The success of any game depends on how the player is handy with a trend. The concept “trend” includes purposeful movement of the price in one direction. If the price goes up, the bull trend is observed, in cases of fall the bear trend is analyzed. And thus, it isn't so important, what is observed the long-term or short-term game. Anyway, determination of a trend of the price, regularity of all process remains to constants. Movements of a trend are influenced by many external factors, to observe which is rather difficult therefore from all variety only a few factors get out and analyzed. Professional analysts of the financial market are engaged in the analysis of the dynamics of a trend, besides the often influence of some is quite small. The government, gossips, expectations, the international events, supply, and demand are the most essential.
How to determine a trend using the major driving forces
To understand how these or those events affect the dynamics of price movement helps fixed supervision over a trend. The analysis of the occurred trends helps to predict future determination of a trend. And it, in turn, promotes successful exchange enrichment. So, how works the most effective factors which help to determine a trend?
The most important influencing factor is the government. The policy of the government of one country can have a great influence on the dynamics of the free markets. Raising or lowering interest rates, the government regulates the monetary system, slows down or, on the contrary, accelerates economic development. And cutting down or increasing expenses which in most cases concern social policies, the government establishes the fiscal policy. Such important issue of the external economic policy as investments, also in many respects depends on decisions of the government. Therefore, the government constitutes more than 90% of forecasts in the determination of a trend. The main postulates of the fundamental analysis are inseparably linked with government policy.
The international events concern inflow and outflow of the fixed money capital. It is clear to any trader, the more is a commodity export, the higher inflow of money will be, and the economic condition will increase. The more outflow of money, the is weaker is the state. Proceeding, apparently, from simple statements, it is possible to resolve an issue with ease how to determine a trend of any currency.
The predicted movement of the price is influenced strongly by gossips and expectations. Economic events come proceeding from today's conditions. Usually, determination of a trend with the use of the current gossips happens with the help of bias indicators. It is known that the majority of indicators participates in the positive forecast about 90% of successful transactions.
A peculiar splash in the prices causes the demand and supply. As well as with any economic problem, the demand and supply are the main engines of the relations. Demand increases, the price rises. Demand remains invariable, but the offer raises, therefore, the price goes down. Skillful use of the major factors affecting the financial market can be the guarantor of the successful answer to a question of how to determine a trend.
The difference in trend determination between long-term and short-term periods
Factors described above help to understand how to determine a trend in any temporary period. However, an important aspect is an explanation of how all external factors at the same time can be combined. In spite of the fact that they quite strongly differ, thus, they are harmoniously combined. The policy of the government influences foreign economic activity, regulating export and import, and the demand and supply are predetermined by decisions of the government.
The announcement of the Government orders on financial policy of the state has a strong impact on the trends of the long-term period. Reduction of taxes conducts to an advance in price, economic growth, the returning tendency stimulates a reduction in price. However, such publications cause fluctuations on short-term trends. Being guided by the received news, investors and traders make flash-like actions, causing market fluctuations on the shorter periods because to determine a trend in one day is possible only by the spontaneous decision. While on the long-term periods traders and investors make already conscious decisions, having estimated the last decisions of the government and having determined what impact these decisions will have on the market further.
It is very difficult to measure the international relations, owing to specifics in the everyday markets, however, they are shown very characteristic in the long-term markets. Especially as the exchange market directly depends on price value of the currency of the country in relation to other currencies. Information which arrives as a result of actions taken by the government acts as a stimulator to action. Expectation where the market under the influence of events will go is created. In the case of the organization of coincident opinions group the trend which can be observed for an appreciable length of time is created. Determination of a trend happens under the influence of all participants of the market. Both positive, and negative. Without getting profits, participants bowl off, stimulating with that movement in the same direction. As soon as on a trend there is a glut tendency, movement of the price turns for the short or long moments.
How to determine a trend under the influence of the main laws of economy
The ratio of supply and demand is the cornerstone of all economic relations. And there is a question how to determine a trend which depends on the demand and supply. The demand and supply have an essential impact on the market. Under the influence of the given key definitions traders make the transactions, investors take decisions. All activities of the financial markets are based on this key moment. In the case of the commodity markets, the offer is determined by goods. Both the demand or supply behaves, and the price in the market is determined. Suppliers of goods hope to receive a higher price for the goods, and buyers try to lower it. The great demand conducts to increase in the price. Determination of a trend comes from the current demand and supply. On the shorter periods exist the spasmodic behavior of the price caused by the threat of depletion or supersaturation of the offer. Practically on all temporary periods, the same picture is observed. The higher is the offer, the lower is priced low and vice versa. The balance tendency practically never comes. It is simple because it is the market which incurs either loss, or profit.
Thus, the answer to a question how to determine a trend in any financial market it is possible to get, having determined four main components of external factors:
- Cross-border transactions
- Expectations and gossips or hearings
- Demand and supply
Each of these factors has an impact on the trend determination in any period of market movement. It would seem that all four factors are very different, however, they are perfectly combined with each other. Moreover, they are strongly interconnected among themselves. A change of one leads to the changes of another factor. The strongest effect of influence is the demand and supply. This factor affects all aspects of the financial markets.