Most derivatives traders use market technology for trading. You trade after the technical analysis because the course offers you the best and most current information. Unfortunately, the mistake is often made to ignore other important events, on the pretext that these events are only an emotional barrier to trading.
If you have strict risk management, you can still do so function. However, the fact leads to many wrong trades that could be prevented if you keep an eye on important upcoming decisions. Some traders take this to heart by not trading on days when important economic data are published.
Whether professional trading is successful is measured by a benchmark, i.e. a comparative value, which in most cases is in the form of a market index is chosen. If the trader manages to beat this within the year, he can count himself as a professional trader.
Traders who only act according to market technology and have no previous knowledge of the current market situation, i.e. almost all beginners In trading, you are confronted with a large number of wrong trades because they cannot interpret the situation correctly. But how do you learn to assess the current market situation?
How is the general market picture shaped?
The general market situation describes the basic direction on the markets, which is determined by certain heavy-weight factors such as changes in interest rates. Why interest? Because interest rates have a direct impact on capital shifts within different currency areas.
Bonds are one of the safest investments for large investors such as insurance companies or pension funds. The investment of capital will always take place in the higher-interest and safe currency areas, and there bonds The largest share of the currency market, changes in interest rates are particularly evident in exchange rates. Just look at the EUR / USD exchange rate for the past 12 months and you know what is meant.
The ECB's interest rate cuts have caused the euro to depreciate sharply and have led to a capital shift into US dollar bonds. Anyone who has traded the euro long for a correction purely according to technical criteria within these 12 months has often been instructed otherwise.
You can also see that interest rate expectations have an impact from the EUR / USD currency pair, because the worse currently the US economy is running all the more, the planned rate hike by the US Federal Reserve is moving into the distance. And lo and behold, the euro is getting stronger.
In summary, one can say that the general market picture is shaped by monetary policy measures, particularly in currencies, and these differ depending on the interest of the central bank. If the ECB is currently still interested in the devaluation of the euro and inflation, the FED tries, for example, to create a stable economy and aligns its steps with how the labor market develops.
The example with the EUR / USD is detailed, however, is only one among many. The general market situation on the stock markets is also shaped either directly or indirectly through monetary policy measures. If you compare, for example, the German stock markets (DAX) and the United States (S&P 500), it becomes clear that it is currently not worth investing in or trading in the S&P 500, since it has been trading in since the beginning of the year is in a very volatile phase and there is a reason for that. This is namely the transfer of capital within the stock markets to the EU.
So if you are familiar with the general market situation, you automatically choose values that can offer a better risk-reward ratio because they are additionally supported in their directions by certain circumstances. On the other hand, you let trading be in values that become more volatile due to such circumstances, see S&P 500.
So it always brings something to deal with the matter in more detail, because that concludes the actual trading strategy using the market technology, but can prevent you from being stumped after many wrong trades.
Beginners should therefore always be skeptical if so-called professionals expressly advise them against dealing with the capital market and only the technical ones Recommend analysis.