What's Is Automatic Forex Trading First , automatic forex trading, like any speculation form, has a goal that is more important than anything else ; making money ! If this is the premise we start out with, that making money is our goal , then in a massive global market market, how do we do this ? The first thing you need to decide is if you are a technical trader, fundamental trader, or a combination of both. Later we'll have more articles on this topic , but we'll assume for now that you keep track of current events and world affairs and are therefore attracted to the fundamental side of the game . Then you must ask yourself , what are the single most important fundamental factors that drive currency movements ? If the fundamentals is what you're focusing on , there is one thing above all else that will drive your forex trading decisions ; the interest rate differentials between various countries. What exactly is an interest rate differential ? That is a very good question! Imagine that the Australian Dollar has a 4% short term interest rate. This means that if you live in Australia and you're in debt this is the very base rate determining what you're paying on your home mortgage, your credit cards, etc . If you're a creditor you can use this 4% short term interest rate as your base rate that decides how much your investments make; which can include certificates of deposites that come from a bank locally. Then suppose that the short term interest rate of the US Dollar, which the Federal Reserve sets , which is 1%. How are currency movements affected by all this ? If the short term rate of the Australian Dollar is 4% and the short term rate of the US Dollar is 1% it's all as simple as this : investors will seek a higher yield on their investments and because they can get more interest in Australia funds are then moved by them to the land "Down Under" . This shift in investments of capital flows leaving the US and going to Australia leads to a weakening of the US Dollar since demand is smaller than supply and the Australian Dollar becomes stronger because the demand suddenly becomes greater than supply . The basics of economic fundamentals are working; where there is more demand for something its value will rise . Next time you think about your automatic forex trading and the next position to put on , just ask yourself , " which country will moving forward have higher rates and which country moving forward will probably have lower rates ?" Purchase currency that is the high interest rate favorite and sell currency favored for interest rates that are weaker and see profits increase as investors leave currency that is weaker and go towards the one that is stronger. This is the essence of automatic forex trading.
Author: Andy Owings - Author of the Drummond Geometry Daily Forecast for Forex Trading & Futures Trading. Andy makes specific trade recommendations every day for 8 popular forex and futures symbols. A free automatic forex trading symbol is available on the website.