With the U.S. economy experiencing inflation at rates not seen since the 1980s, forex traders are monitoring the U.S. dollar closely to see how the currency’s purchasing power and exchange rates are influenced by the accelerated devaluation of the U.S. dollar.

At the same time, U.S. regulatory efforts to curb inflation are already underway. Meanwhile, currency values continue to be roiled by global events such as the Russian invasion of Ukraine, global gas shortages, and lingering economic disruption caused by the pandemic.

While inflation needs to be balanced among other economic forces, this rapid rate of inflation deserves the close attention of forex traders. Here are some tips to help you weather the challenges and preserve your capital when trading in an inflationary environment.

Active forex traders are relentless when it comes to monitoring the various key economic indicators intertwined with the market. The reason for this is pretty clear: These indicators allow a trader to identify both minor and major trends with regard to economic growth. 

Key economic indicators that many advanced forex traders opt to monitor include the Consumer Price Index (CPI), housing stats, gross domestic product (GDP), personal consumption expenditures (PCEs), and the employment report. 

Across these indicators, the employment report arguably carries the most weight because it contains a wealth of statistics that allow traders to read between the lines when it comes to understanding the current state of the economy.

Both the moving average convergence divergence (MACD) and the relative strength index (RSI) rank among the most popular momentum indicators used in forex trading. When used in combination with other technical indicators, both MACD and RSI can offer value in validating trade opportunities and timing trades to optimize your risk management practices.

While they represent a similar approach to evaluating forex trades, the functions of both MACD and RSI are distinct, which makes them useful indicators to combine in trade evaluation. Here’s a look at how to use MACD and RSI as part of your trade analysis.

Even if you have experience trading stocks and other assets, the forex currency market is vastly different in terms of the data you need to analyze. 

Before you trade currency pairs, you need to have a strong understanding of the tactics involved in forex trade analysis as well as the trading rules and best practices that will set you up for sustained success. Here are the six key principles that every trader should know before they start trading with real money.

One of the most fundamental indicators of both financial market activity and exchange rate changes is the Gross Domestic Product (GDP) report. At its core, the GDP’s first release and its revisions influence the currency of the nation for which it is released. If the data comes out higher than expected, this is typically considered to be positive news, and the currency will often see a boost in relation to other currencies. On the other hand, when the GDP data is lower than the market expects, it’s typically considered negative news, and the currency will usually drop in value as a result.

GDP is such a commonly used term, with the GDP report being routinely cited. The following builds on the above introduction to further explain what how the GDP report impacts the forex market.

For adventurous and opportunistic traders, more aggressive forex trading strategies may offer appeal due to the increased earning potential that can come with those risks.

One such strategy is trading forex using leverage. If you’re unfamiliar with leveraged forex trading, it’s important to educate yourself on how leverage works and how traders might want to incorporate this trading option into their overall strategy.

Read on for eight important facts every trader should know before attempting leveraged forex trading.

To consistently turn a profit as a forex trader, your trading strategy can’t only rely on economic calendars and technical indicators to identify trading opportunities as they develop. 

Because forex trading is highly speculative, the sentiments of the overall forex market can be highly influential on the valuation of certain currencies—which means overall trader sentiments can actually move the prices of positions you’ve been targeting. 

Understanding the impact of currency pair sentiment on forex prices is a crucial component of any winning forex trading strategy. The better you’re able to understand these sentiments through the quantified tools and resources available to forex traders, the more effectively you will be able to make timely trades that leverage sentiment with other analyses to better predict price movements and profit opportunities.

Contract-for-difference (CFD) trading is a popular alternative to traditional investing because of its ability to maximize capital investments and, in turn, increase your potential profits or losses. This approach to forex trading has grown in popularity over the past decade, especially with some brokerage firms offering negative balance protection to limit heavy losses that would put your trading account into debt.

So what are the advantages of CFD trading? Here’s a look at some of the other key benefits.

Target trading is one of the most popular forex trading strategies. If you can identify how the market is trending and anticipate how prices will move, you can use that information to preemptively establish profit-taking points, or targets, at which to exit or partially exit your position. 

A grid trading strategy is a common form of target trading in which traders preemptively create conditional stop entry orders and set a profit target for each pending order.

Most forex traders want to stay active throughout the year, even as market conditions change. Whether you’re facing a bull market or a bear market, forex trading opportunities are out there for individuals who are willing to do the research and adapt their strategies.