All you need to know about forex market analysis revealed.
In Forex trading, learning never ends. You have to learn Forex constantly in order to pursue your initial goals in the Forex market: to gain the best profit. If you have just started your journey in the Forex world, Forex market analysis needs to be one of the crucial things to study within your Forex education. Keep reading for further explanation.
Understanding Forex Market Analysis
We cannot deny that trading is entirely different to gambling. You are not only using your hunch in placing your trades. You will need to analyze the market and decide whether it is a good idea to place a trade or not. When it comes to Forex market, there is what so-called Forex analysis. This analysis is employed by Forex trader in decision making.
#1 What Is Forex Market Analysis?
In general, Forex market analysis is something used by a retail Forex day trader to settle on a purchase or sell decision on currency pairs. There are actually some ways to analyze the Forex market. It can be technical in character by using resources like charting tools. It is possible to be fundamental in character by employing economic indicators. Then, it can be sentiment-based too.
#2 The 3 Types of Forex Market Analysis
In the Forex market, there are three main types of market analysis which are used by traders on making trading decision. There has been a continuous debate about which analysis is better than the others. But, before you judge which one is better, it is better for you to know and learn all the three. Now, let’s discuss each of the type as follow.
1. Technical Analysis
When it comes to technical analysis, you will utilize historical price movements in order to determine recent trading condition and also prospective price movement. Theoretically, technical analysis believes that history is likely to repeat itself. It is searching for a similar pattern which has formed in the past to form today’s trade ideas. You will engage with trading charts when coming up with technical analysis.
2. Fundamental Analysis
Different to technical analysis, in fundamental analysis you are going to see the Forex market by analyzing social, political and economic forces which may affect the demand and supply of an asset. When you are using this technique of analysis, you need to understand the reason why certain events can affect a country’s currency. Commonly, good economic condition tends to strengthen the currency.
3. Sentiment Analysis
This technique might be considered as the most straightforward ways to measure supply and demand. The sentiment analysis is based on measuring open trades or interest that becomes the key of supply and demand in the market. This analysis is important to perform considering that every trader has their own opinion about the market which can influence where the market is going to move.
#3 Which Type of Analysis Is the Best?
Then, which type of analysis for
Forex trading is best among the three above? Most professional Forex traders are likely to use strategies that work for them. It is possible that you find technical analysis better or fundamental analysis better. You can even use a mix of two or more analysis techniques in developing your trading decision. So, it’s better to test it out first.
Finally, you need to go deep to find out which one works for you. Just remember one thing, when it comes to Forex trading, your education will never stop. You need to learn Forex continuously even you have been in the market for years. You need to gain as much knowledge as possible so that you are able to become the real Forex master.