All traders – those who already have trading experience and those who are just starting out, know that without analysing the market situation, it is possible to make money in the market only by chance. For stable and profitable trading, you need to know how to analyse the Forex market. How to do it – everyone decides for himself.
Fundamental market analysis
Many traders use fundamental analysis of the market to make correct, thoughtful trading decisions. This is a rather complex analysis, as it is necessary to take into account many factors that can significantly affect the price movement. If you take a particular currency pair, you need to take into account the political situation in the region, the state of the country’s economy, the state of the balance of mutual payments, trends in the movement of large capital, etc.
The weakening or strengthening of a country’s national currency, as well as the rise or fall of the economy, are influenced by economic indicators and news.Very important in fundamental analysis is reliable information about interest rates, the work of major companies in the country, the final results of commodity and currency exchanges.
Technical analysis of the market
Technical analysis of the market is considered by many to be the traditional and the most widespread, both among beginners and experienced traders. This type of analysis is based on studying historical data, identifying certain patterns and applying them in trading. There are several common directions of technical analysis.
Wave analysis
Wave market analysis is based on the theory of Eliot, who suggested that all market movements are regular and cyclical. For clarity, price movements are best viewed as graphically depicted waves. Each movement, whether up or down, consists of five positive waves (trending) and three negative waves (corrective waves, in the opposite direction to the trend).
Graphical analysis
Graphical analysis is based on the visual study of price movement charts, drawing lines and figures on the price chart. This type of analysis is very popular among traders because it is very simple. It is enough to connect price extremums on the chart with the help of a trend line, as it is possible to consider some graphical figures. Having looked at the history – how the price behaves after the formation of this or that figure, we can assume that the price will behave the same way next time.
Candlestick analysis
Candlestick analysis is probably the simplest and most effective analysis of the financial markets. To use candlestick analysis effectively, you need to study the existing candlestick combinations and learn how to identify them on the charts. Candlestick reversal patterns, predict market reversal much earlier than any indicators.
Indicator analysis
This is also a common market analysis, with the help of all sorts of indicators. Indicators draw their readings using processed historical price values. Quite a lot of indicators have been created, showing various parameters of price movement, defining entry-exit points, drawing figures, channels, defining candlestick patterns. However, the overwhelming majority of all existing indicators are lagging, because they operate with historical data of price movement.