Indicators based on which an interest rate strategy is formed
In the stock exchange game, there is always a place for randomness, which is impossible to predict. That is why complex trading methods do not always work, while simple approaches can give excellent results. The proof of this is an interest rate strategy. It does not require taking into account many factors, but at the same time, it allows for high profits.
Experienced traders note that even well-thought-out actions can fail. The more variables you have to consider, the greater the risk of missing something. Another important aspect of Forex trading is a clear understanding of each action. When using someone else’s strategy, a trader may not fully understand its logic. This, in turn, reduces the efficiency of trading.
The optimal solution to avoid such problems is to use the simplest possible strategies. One such strategy is trading on interest rates.
Features of the approach
The country’s central bank, which owns a particular currency, sets the interest rate. This indicator is the basis for the lending conditions of other financial institutions. In addition, the interest rate affects the exchange rate of the monetary unit. In the case of stock exchange trading, interest rate fluctuations are considered a key feature. A trader takes it as a sign to open a new trade or to wait for better conditions.
Rates can signal the features of the trend, namely:
1. An increase in the indicator stimulates the value of the currency, which contributes to the growth of the exchange rate.
2. An increase in the opposite direction affects the national currency. Local money becomes cheaper, creating a downward trend in the market.
The trader’s actions will depend on the changes in the interest rate. If it increases, opening a deal to buy currency is necessary. If the rate decreases, you can sell currency. When using this strategy, it is essential to pay attention to the pair’s base currency.
Changes in exchange rates are often felt before the authorities officially announce them. In this case, analysts’ forecasts carry more weight. If the expectations are justified, there will be no noticeable fluctuation in the exchange rate.
What is important for a trader to consider
Various services provide information on current interest rates. When studying such data, a trader should pay attention to several factors:
– the value of the rate itself;
– the date and time when the information was published;
– the monetary unit to which the currency is linked;
– the forecast of its changes.
If the current forecast differs significantly from past values, the fluctuations are already putting pressure on the trend.
An interest rate strategy is quite universal. It is suitable for use in any currency pairs. The only condition is that the rates are available in the broker’s terminal.
