There are basically 2 basic methods used by Forex traders to analyze the market. They are technical and fundamental analysis. Pure technical analysts will say that it is impossible to trade on this news, because the market moves so fast and the charts will tell you all the news that comes out there. Radicals, on the other hand, would say that only news can move the market. Technical indicators are always followed. So which methods do we want to use ?? To find out, let’s take a look at the pros and cons of both methods.
Technical analysis involves tracking the movement of past currency prices and using indicators to help indicate where the current price is heading. This analysis can be done manually or automatically. Under automated systems, traders use software (expert advisors) or robots to help them find trades and identify entry and exit routes. Technical traders believe that all the information needed to trade is in the chart.
Fundamental analysis focuses on key economic, financial and political factors to determine the price direction of a currency. Basic traders believed that the movement of currencies, whether strong or weak, depended on the strength of the economy, financial and political conditions. Therefore, basic information and news are important to them. News and reports like interest rates, employment, trade balance and GDP are very important. Other information such as retail sales, durable goods, domestic sales and ISM will also affect price movements.
It helps to provide specific entry and exit points for traders during trade.
– Charting can provide everyone with an easy way to quickly identify trends. This is possible because the same statistics are being viewed by millions of traders, so if a large number of foreign forex traders do the same, it will be a self-fulfilling prophecy. The prediction will come automatically.
It focuses on charts and indicators. Without a doubt, this is by far the simplest and easiest method used by many traders.
Charts and tools can also help at some point when the trend begins or ends. So help traders plan their profits and prevent losses more accurately.
If too many traders stop around the same area, this could lead to a price increase as it could potentially trigger these stops on purpose by the big players in the market.
The tools used are basically rear pointers. It can be dangerous to rely entirely on the assumption that current prices and trends will predict future prices. They often do, but not necessarily.
Relying solely on charts means that you may not pick up other signals that could potentially change the trend.
– Analysis Analysis enhances our knowledge and understanding of the global market. So help us get a clearer picture of the general health of the global economy.
– We can use basic analysis to explain the unexpected movement in prices. So you know which prices are higher or lower.
When there is a big difference between the expectations and the actual results, the publication of major news can ignite a big price movement in a short time. If you can predict and capture this price movement, it can be very profitable.
Funds analysis is better used to predict long-term exchange rates.
There is so much information that one can easily confuse.
– It is very difficult to use all this information to identify a particular entry or exit point for a business.
– The release of short-term news in a short period of time can send a wrong signal to open a trade and mislead the trader. This signal often causes knee jerks in the market.
-Sometimes released information or news may already be priced in the market. Therefore, information has no significant effect on price movements.
-This requires a person with at least some basic knowledge of economic background.
News releases can cause dramatic and rapid price movements of currency pairs at any time, both up and down the currency pair, as the Forex market tries to digest the news. Inexperienced traders may find themselves at a disadvantage.
To draw conclusions
In my opinion, there is no ideal or best way to analyze Forex that will guarantee you 100% results all the time. Technical analysis and charting will help short-term traders make their decisions, while long-term traders will need to keep themselves away from the latest economic news and data on the country’s currencies. Note that these methods of analysis are just tools. Used properly, it can help you trade more efficiently in general. This is why most forex traders use both analytical methods to make trading decisions.
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