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Central Banks. Effects on the Forex Market - Forex Trading Strategy Q&A

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Need help becoming profitable? Watch this interview, where Jarratt reveals THE EDGE, which got him #2 ranking: http://www.jarrattdavis.com/forex-course How Central Banks Affect The Forex Market? Essentially I base my trading around what each central bank is doing, so if a central bank is raising interest rates I’m looking to buy that currency, if it’s looking to cut interest rates I’m looking to sell the currency, that’s a very simple approach and methodology yet very powerful. So how can you figure out what the central bank is focusing on? Well; there are a couple of things to bear in mind when considering this, the first being is that a central bank will usually focus on a certain problem, whether that be inflation ,growth or QE it could essentially be a whole host of different things. The point is you have to ascertain what it is the central bank is focusing on, once you know that you know what economic indicators to keep an eye on yourself. So if for example the central bank is focused on inflation and that they are looking at that data when considering raising interest rates, you know to look out for inflation figures pertaining to that economy as that is what the central bank will also be considering; so let’s say inflation starts to drop we then know that the central bank is going to be less likely to raise interest rates and the price of the currency will subsequently fall and vice versa if inflation is going up we know that the central bank is going to be concerned about that and consider raising interest rates and the currency will subsequently rally up. So how do we find what the central bank is focusing on, well I use two tools first a economic calendar I personal use ForexFactory.com but any economic calendar it doesn’t matter and on that calendar you’ll have statements, once those statements are released you can either interpret it yourself or you can head over to a news website. I use Bloomberg.com/currencies and within this site they will essentially elaborate in the statement how they expect any data point to move the market, what their expectations are, how the central bank is viewing the market and what indicators the central bank is focusing on. So there; in short a very simple way to understand and find out what the central banks are focusing on and how you can apply that in your trading.
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Text Comments (10)
Mpho Sylvia Ramalamula (5 months ago)
Hi There I am really struggling with trade may you please assist. Thanks
Kieran Donnelly (6 months ago)
First of all thank you for making these videos, they're short, sweet and simple! The thing that's always confused me with Forex is knowing what pair to trade, for example if you think the interest rates are going to increase putting USD up, does that mean I can long any pair with USD or what? Because of course you can't just long USD on it's own, I'm sure I'm over complicating it.
Kieran Donnelly (6 months ago)
Once again a great answer thank you, that helps a lot :)
You need to find a pair where the other currency's central bank is at least neutral or in best case scenario dovish.
aboctok (1 year ago)
Jarratt, based on the weather forecast, there is an expectation of rain. Better go and get your washing in!
Rickster84 (3 years ago)
Hi Jarratt, I must say that out of all of the systems that I have encountered, understanding the fundamentals is the most common sense approach. Thanks for allowing me to shake off the nonsense. One question, with many central banks having record low interest rates, doesn't the next few years present us with some great trading opportunities as they increase them? Thanks, Ricky Bartlett
Jeffrey Elliott (3 years ago)
Hey there Jarratt, thanks for all the effort you have put into sharing your knowledge, I was wondering if you could post a video on how interest rates affect currencies. Many Thanks
Ahmad Orlando (3 years ago)
did you mean http://www.bloomberg.com/news/currencies/ or http://www.bloomberg.com/currencies/ much appreciate
Essentially I base my trading around what each central bank is doing, so if a central bank is raising interest rates I’m looking to buy that currency, if it’s looking to cut interest rates I’m looking to sell the currency, that’s a very simple approach and methodology yet very powerful.  So how can you figure out what the central bank is focusing on?  Well; there are a couple of things to bear in mind when considering this, the first being is that a central bank will usually focus on a certain problem, whether that be inflation ,growth or QE it could essentially  be a whole host of different things.  The point is you have to ascertain what it is the central bank is focusing on, once you know that you know what economic indicators to keep an eye on yourself. So if for example the central bank is focused on inflation and that they are looking at that data when considering raising interest rates, you know to look out for inflation figures pertaining to that economy as that is what the central bank will also be considering; so let’s say inflation starts to drop we then know that the central bank is going to be less likely to raise interest rates and the price of the currency will subsequently fall and vice versa if inflation is going up we know that the central bank is going to be concerned about that and consider raising interest rates and the currency will subsequently rally up. So how do we find what the central bank is focusing on, well I use two tools first a economic calendar I personal use ForexFactory.com but any economic calendar it doesn’t matter and on that calendar you’ll have statements, once those statements are released you can either interpret it yourself or you can head over to a news website. I use Bloomberg.com/currencies and within this site they will essentially elaborate in the statement how they expect any data point to move the market, what their expectations are, how the central bank is viewing the market and what indicators the central bank is focusing on. So there; in short a very simple way to understand and find out what the central banks are focusing on and how you can apply that in your trading.
Adam Nickzam (4 years ago)
Thanks jarrat
David del cid (4 years ago)
thanks Jarratt, i always following you.

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