How can forex traders profit off stocks?

How can forex traders profit off stocks?

Strong stock market = strong national currency.

Weak stock market = weak national currency.

These are the main equations that we are to think about today.

But, Anna! We are forex traders! Why would we be talking about stocks?

Well, my friends! Just like with intermarket correlation there is a connection between national stock market and performance of the national currency.

What is it you will ask me then? Well, I will tell you.

In order to participate in the national stock market, you are to own the currency of the market where you are participating. That means that in order to buy French stocks, Russian trader is going to have to SELL rubles and BUY euros. That will lead to increased supply of rubles, which would drive Russian currency lower. In its turn, demand for euro is going to rise up just as its value.

That means that by analyzing the situation in the national stock market we can determine what the performance of the national currency is going to be.
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As a rule – the stronger the stocks market of the country is the more money is going to be poured into the economy of the country thus strengthening national currency. The weaker it is, the more money is going to pour out of the country and the more risk it is going to pose.

So, we as forex traders can generate profit by buying strong stock and selling the weak one.

More about is further.

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