What is the currency war and how small investors can cope?

U.S. analysts have begun to argue that the dollar is losing its value and it seems that there is nothing I can do to stop this free fall. The reasons are many: the expansionary monetary policy of the Fed is flooding the banking system with cash, diluting the value of the dollar. Also the U.S. government seems to devalue the dollar for export submitted more accessible. And in this context China is recruiting other countries in their efforts to weaken the dollar in international trade. This devaluation for more market share can trigger called ‘currency war’ is that all countries start to devalue their respective currency for the same purpose, neutralizing the effect sought.

Currency investments

With the dollar down analysts believe that foreign investment can generate good returns. But how investing in forex? To begin, you must know the forex market, (abbreviation for Foreign Exchange). The Forex is an international exchange market where currencies are bought and sold worldwide. The value of the currency market is based on supply and demand.

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It is the most liquid financial market in the world, and is the daily price can reach $ 4 trillion, which means two things: first, you can find a buyer or seller in a few seconds, and secondly, the large volumes of buying and selling leads that prices are very volatile. This volume creates a large amount of currency fluctuations, which can be seen as a treasure or a minefield for investors, depending on their experience and the strategy they use.

Unlike a standard market like NYSE or Madrid, currency trading is done in all corners of the world via telecommunications, and being available 24 hours a day. Purchases can be made through an order to a broker or through an outside trading account, which means investing with borrowed capital taking advantage of the leverage that can invest more, but you can also lose more than your initial investment.

Types of analysis for investing in currencies

There are two basic approaches to investing in this market: technical analysis and fundamental analysis. Technical analysis is the strategy used by beginners to evaluate investments. Its basic premise is to analyze all possible factors that influence the value of the currency. Investors seek to identify patterns in the data to see if the price movements of currencies are caused by certain events and whether these events are repeated. The other type is the fundamental analysis, which evaluates a number of representative indicators of the country to which the currency-its economic, policy, central bank interest rates, the unemployment-inflation with an effect on its currency.