From Robin Lofton,
Your Guide to Forex Trading.
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Currency Profiles

What are Currency Profiles?

Although the Forex market is unique, the currency pairs traded in it are also special. Every trader knows that stocks have certain characteristics or personalities. Currencies also have special characteristics. A trader can learn the special characteristics (or profiles) of each major currency being traded by experience, study, or both. Knowing a currency’s special characteristics, particularly related to price movement, can help the trader to make better trading choices and increase the possibility of a winning trade. Learning the currency’s characteristics, strengths, and sensitivities is made easier by focusing on a limited number of currencies, like the majors . That is why one of the biggest trader mistakes is to trade a large number of currencies. The trader needs the time to focus on a short list of currencies to master them.

Why Important?

Every currency has its own distinct qualities. Some currencies are linked to the price movement of commodity prices. Others move completely opposite to commodity prices. Some currencies are very sensitive to certain types of economic news while others respond differently to news. Some currencies move in response to expected news, but not actual news. Others move only in response to real news. Knowing what each currency will respond to and how it will respond is very important to forecasting their price.

Fundamental Analysis

Currency profiles focus on economic news and reports. But currency profiles transcend the examination of economic news and reports in the Forex market. They utilize Intermarket analysis , meaning the price movements in the bond, stock, and commodities markets are an important part of a currency profile. Each currency will respond differently to the fundamental reports.

Technical analysis is not a part of the currency profile because it is limited to price movements caused by technical factors rather than price movements on the fundamental level.