Do you actually know it all about Central banks?

It is evident that during these past weeks, centrals banks have acted, as expected, as major player in the Forex markets. 

But, what is a central bank? Do you really know what are its functions?

We’ve gathered some educational content to answer all your questions about central banks policies and their important role on the forex markets.

 

• The Main Players In The Forex Market

In this Learning Center chapter you will find an extensive and detailed explanation about central banks and its way of operating.

“The role of central banks tends to be diverse and can differ from country to country, but their duty as banks for their particular government is not trading to make profits but rather facilitating government monetary policies (the supply and the availability of money) and to help smoothen out the fluctuation of the value of their currency (through interest rates, for example).
The majority of developed market economies have a central bank as their main monetary authority…”

 

• Are Central Banks major players in the Forex markets?

In this video, Jarrat Davis does a brief and clear explanation of the importance of central banks in Forex Trading.

“The central banks is the only thing you need to be watching when you’re looking for trades on individual currencies pairs… Every time something happens, every time the news comes out, a professional trader will be looking at it and their first thought will be how this will impact how that central bank adjusts their interest rates.
Their thought process will be: ‘will any particular news event make the central bank more likely to decrease rates or increase rates?’ ”

 

• Central bank monetary policy and why it matters to traders

This report from Xglobal makes clear the role of these economic actors from a trader’s perspective and adds an explanation about the areas of interest of central banks.

“For the average trader, one can be mistaken for ignoring Central bank policies. However, if you are serious about trading for the long term, it is important to understand the role Central banks play in the financial markets and more importantly how central bank monetary policies influence the sentiment and the exchange rate fluctuations in the market.”

 

• What is a Central Bank and what can it do for me?

In this article, Babypips analyzes the key functions of a Central Bank paying attention to monetary policies, inflation and credit system management.

“A Central Bank acts as banker to commercial banks. It refinances their debt at the prevailing discount rates. Central Banks also act as a clearing house for the commercial banking system. Another key function of a Central Bank is that it acts as a lender of the last resort. This becomes important, when commercial banks face a sudden financial crunch or become insolvent.”

 

• Making money in forex is easy if you know how the bankers trade!

Finally, Bradley Gilbert show us the importance of knowing how to trade central banks decisions to become a successful trader.

“There is a lot of money to be made from trading the economic data releases. The key to trading the releases is twofold. First, having an excellent understanding of the fundamentals and how the various releases impact the market. Secondly, knowing how to execute the trades with precision and without hesitation. If you can get a control of this aspect of trading and have the confidence to trade the events then you’re truly set up to make huge capital advances.”