#ForexChief #TradeBalance #trading #forexschool #forexeducation #indicatorsGDP #MonetaryPolicy⠀
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Why «Trade Balance» is useful for real transactions
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📅 The economic calendar has given this indicator a high degree of significance. Trade Balance (or International Trade) is considered optimal indicator of competitiveness of goods, but in fact, it is the difference between volume of exports and imports in monetary terms.
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Statistics are calculated taking into account seasonality and published monthly. The stock market uses industry data (Consumer goods, Food, Raw materials & industrial supplies, Autos, Capital goods, Other merchandise). For Forex transactions, consolidated data is used without detailing.
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Trade Balance is considered a strong factor of influence − dynamics of import/export is associated with the need for national and foreign currency. A country uses international foreign exchange reserves to pay for imports, and its trading partners, accordingly, generate demand for its currency.
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A positive balance (surplus) is formed as a result of an excess of exports over imports. This means that the country exports more goods than it imports, that is, it has a steady demand for its currency. The exchange rate of national currency will rise.
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A trade deficit or negative indicator balance occurs when imports exceed exports. The country does not have enough «foreign» money to cover the cost of purchasing imports. This hurts the exchange rate of the local currency.
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Simplest idea is to trade on news: you can «catch» price momentum on a sharp increase in positive or negative balance of visible trade. The long-term strategy involves a comprehensive analysis of monetary policy, GDP indicators, unemployment, inflation, industrial production to open transactions at a distance, at least for 2-3 months.
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Profits to y’all!