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The FX Bootcamp Guide to Strategic and Tactical Forex Trading by Wayne McDonell

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PART TWO SUMMARY

To recap, the key takeaways for Part Two are as follows:
• Strategy is creating a fundamental bias based on the study of economies.
• Economic data points to inflation.
• High interest rates attract money to them.
• Foreign investors must buy the local currency of that country.
• This drives up the demand and increases the valuation of the currency.
• Low valuation is good for exporters, bad for importers.
• Wide interest rate differentials attract arbitrage traders.
• Carry traders borrow cheap money and invest it in higher yielding assets.
• Carry trade risk comes from price volatility.
• Fundamentals can reverse trends and increase volatility.
• As a trader it is important to track economic trends like central bankers do.
• Central banks manage and maintain healthy economies and indirectly currency valuations.
• They control money supply and costs.
• Exporting economies like low valuations.
• Importing economies like high valuations.
• Low interest rates tend to lower valuations.
• High interest rates tend to raise valuations.
• Currency valuations tend to correlate directly or inversely with each other.
• USD is the reserve currency of the world in all of the major currency pairs and is used by other economies to buy oil.
• These are good reasons for new traders to specialize in trading USD.
• Currencies also correlate with commodities such as gold, oil, and stock indexes.
• Oil prices correlate with CAD.
• Gold prices correlate with AUD.
• Stock prices ...

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