More than 80% of currency trading volume is speculative in nature and, as a result  the market frequently overshoots and then corrects.

Also, many of the macroeconomic catalysts and events traders use in the equity or futures markets   including gauging interest rate changes and economic releases   are also integral to forex trading. In addition, price moves in many commodities or indices are highly correlated to currency moves.

For example, Australia is the world’s 3nd  largest gold producer, which explains the Australian dollar’s 80% positive correlation with gold prices. As a result, many commodity traders can trade forex to spread their risk or leverage certain positions.

The stock market has traditionally received the lion’s share of attention in the trading industry,but foreign currency (forex) trading has surged in recent years. Forex’s 24-hour access, liquidity and high leverage has attracted many active traders. Intraday traders can respond immediately to breaking news and events, so avoiding having to wait for the market to open and risk “paying the gap.” Because of regulations, capital requirements and technology, access to the forex market was traditionally restricted to hedge funds, large commodity trading advisors  and institutional investors. However, in recent years many firms have sprung up to offer forex trading to retail traders.The growth in this area of the trading industry has been very rapid, especially as equity and futures traders realize the approaches they’ve been using for years in their respective markets  particularly price-based techniques based on technical and quantitative analysis  are equally applicable to forex.

Fundamental analysis focuses on the economic, social and political forces that drive supply and demand. More so than other markets, currencies tend to develop strong trends, and

one of the key roles of fundamental analysis is forecasting longterm trends. Analysts consider various macroeconomic indicators, such as economic growth rates, interest rates, inflation and employment when forecasting the markets. Fundamental drivers of currency moves include economic data releases, interest rate decisions, news and announcements, all of which can indicate potential changes in the economic, social and political environment

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