Successful Forex Trading is certainly possible and if you are willing to take the time to do your homework and follow the politics and economy of the currencies you are looking to invest in can be very lucrative. A good example is a trade that was made in New Zealand where they have the highest interest rates in the developed world, having the highest interest rate in the developed world New Zealand is a place where a lot of capitol flow or foreign investment takes place to yield high returns. The Japanese love to invest in debt in a high yielding currency in a bond called Uridashi bonds. The primary reason the Japanese are so interested in Uridashi bonds is the high rate of return versus the 1% or less available for investment at home in Japan.

To show you how Uradashi bonds can lead to good and profitable Forex Trading we saw that there were a lot of Uridashi bonds being purchased in New Zealand dollars which meant the capital flow would increase and so would the currency. The next step was to decide is when the New Zealand Dollar increased or went long which would be the best currency to pair with it to go short the United States Dollar or the Japanese Yen. The Forex Trading pair that looked the best was the NZD/USD and we bet on this based on the Uridashi purchases and made a very good trade and the pair raised over 40 points in a day.

Another key factor to understanding and making good Forex Trades is to watch mergers and acquisitions as it will not change currency value long term but can certainly effect it short term and make for profitable Forex Trades. The way that mergers and acquisitions can affect the Forex Trading market is that typically a company from one region like Europe is looking to purchase a Canadian Company or its equities and assets. When a company is being purchased by a foreign company typically they have to purchase the currency to make the acquisition which is usually in the billions which can raise the currency for days or even weeks at times. If you follow the interest of acquisitions and international mergers you can make good short term Forex trades, a good example is in late 2006 there was a lot of interest in buying Canadian companies assets and equities and assets by Asia, Europe, and the Middle East and the economy was weak in Canada but the currency stayed strong due to foreign investment interest. In November 2006 after a Canadian government announcement by Stephen Harper a newly elected conservative that Canadian income trust which currently had certain tax advantages would be taxed like all other Canadian securities much of the foreign investment interest went backward and the money started flowing out of the country and then caused the Canadian currency to decline and investing on Canadian currencies decline was also a very profitable opportunity for Forex trading. To show you how profitable we made 45 points in a few hours betting on a strong United States Dollar over the then weakening Canadian Dollar based on this change in the market.

As I stated international mergers and acquisitions can be a good short term way to make profitable Forex Trades as to buy capital assets or equities countries have to first buy currency which temporarily increases the value, but when as in the Canadian merger situation when the interest in acquisitions changes the currency will drop as fast as it went up and you can make money in both directions if you watch the trend and trade accordingly.
Forex Trading can be very profitable and tricky to accurately predict at the same time, the key factors that change currency value are as I have stated interest rates, economic growth, politics, trade and capital flow, and international mergers and acquisitions. To be truly successful at Forex Trading you need to understand how to see when the five factors will change the currency at the same time, for example a currency may look strong due to interest rates and be kept from increasing due to political situations. Another good example is a currency may look as though it may increase due to economic growth and stay at current value due to trade flows or acquisitions. If Forex Trading was easy then everyone would be doing it, it is a little like a game of chess, you need to understand the game and be a few moves ahead of the market by doing your homework and watching for coming events or moves in the world market.

Forex Trading is a lot like chess and you can either learn to play by spending hours or sometimes years studying the game and trends, or you can look for a good qualified and successful Forex Trading Analyst to guide you in making good and profitable Forex Trades.

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Forex Trading can be very profitable if you are good at predicting economic and political changes, as many times this can increase currency which leads to a good profitable Forex Trade. When looking at political events that will effect Forex Trading you should look at the obvious like missile launches, wars, terror attacks, global meetings like G7 or OPEC that have wide reaching effects. A good example is when Saudi Arabia said they were going to cut oil production by a million barrels after the price of oil dropping over 10% in less than a week in October 2006. The Saudi cuts in production were to take effect on November 1,2006 an again in December and if you would’ve invested as many did mid October in the Saudi’s oil producing rival Canada to gain from this change you too could’ve made huge returns. Many invested in the Canadian dollar going long over the US dollar, as all this additional oil business going to Canada should strengthen the GDP and economy and increase the currency an it did, there was as much as 70 points gain in one day in late October.

In truly understanding economy of a country and how it effects their currency, you first need to understand that there are two types of economic flow: trade flow and capital flow. To simplify things trade flow relates to how much income a country makes through trade, capital flow is how much foreign investment interest there is in a country. Countries are effected by different things some more by trade and others more by investment. Some of the countries that their strength are dependent on trade flow are Canada where oil is main traded commodity and source of income, Australia where industrial and precious metals are primary commodities, New Zealand where agricultural products are main commodities, Japan and Germany both have a variety of traded items that from cars to technology items that make up their world trade.

In the US and UK capital flow is much more important and foreign investments are important and can greatly effect the economy and currency value. To show you what I mean in the US financial services or investments are approximately 40% of the total profits of the S&P 500 which is rather significant. To understand how important investment is look at the US where with the multi billion dollar trade deficit and multi trillion dollar debt the dollar should be greatly depreciated. As stated capitol flow though the US economic system and currency is largely effected by foreign investment and the huge capital invested by the rest of the world in the US offsets the negative effects of the trade deficit and debt and keeps the US currency strong. Some are concerned with the high debt, and huge trade deficit that the US may not attract enough foreign investment to keep the US dollar strong.

Forex Trading can be very profitable if you do your homework and understand what factors effect the economy and currency value of a certain country and which countries are more dependent on trade flow and which countries are more dependent on capital flow and when to capitalize currency changes.

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In successful Forex trading it is said that changes in politics always trump economics for changing the currency values. A good example of political issues swaying the value of currency over economic issues is in mid 2005 Canada’s Liberal party leader Paul Martin the prime minister had led Canada to best economic performance in 30 years and despite the huge profits due to oil exports to the US the Canadian dollar stayed weak due to political issues. The political issues in Canada with the Liberal party lead to a no-confidence vote for the prime minister, which effected the currency, yet when Martin’s government was reelected the focus again turned to economy and Canadian dollar rallied.
If you like predicting currency changes you could easily profit from changes like recently when the Canadian dollar earned close to 70 points in 24 hours, which at a trade of $10,000 would have paid $700 at a 10 to 1 leverage.

In Forex trading as I have stated political changes far out weigh economic results at changing currency values, another example would be when in Japan the yen floundered in mid 2006 when Governor Fukui was thought to have to step down due to investments with Yoshiaki Murakami. Murakami was involved in insider trading, and Governor Fukui having invested with Murakami damaged his reputation significantly. Fukui was one of the most important people involved in Japan’s monetary policy, and the scandal made the Yen flounder despite Fukui’s innocence. During this time the economy of Japan was dong very well business, exports, and investments were all strong, and unemployment was low as well but this political scandal and the rumors that Fukui might have to step down kept the Yen low. Governor Fukui was a proud man and refused to step down and eventually the scandal about possible implications to the insider trading scandal passed and the Yen bounced back and reflected the strong economy. This is once again a prime example of why you have to watch the politics of a country that you look to speculate the changes of currency, as clearly politics can effect currency values more than economy as I have clearly shown.

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