Technical Analysis - Learning 3 Types of Forex Analysis (Module 6)
On the previous module, we've discussed three types of forex charts. What that, you'll know what is the most appropriate type of chart for your analysis. In this post, you'll learn addition forex trading analysis that will help you win in trade.
Now, be ready and grab your pen and paper. Read this post and be a smarter trader.
In any industry, better profit comes after a great analysis and strategy development. Within the forex market, charts and analysis is a great combination in creating an effective forex strategy.
3 Basic Types of Forex Market Analysis
- Technical Analysis
The technical analysis is used by traders to understand the previous price action and probabilities of its future behavior within the forex market. This analysis often used as indicators within the forex chart.
Theoretically, technical analysis is used to look for the current market information reflected in the price. In that case, the price action will be a significant factor that you need to make a strategic trade.
Fundamentally, technical analysis is somehow stating the saying: "History tends to repeat itself." Whenever the price level holds the key support or resistance from the past, you can watch out for it to occur again and base the trades around the historical price level.
Below is the sample technical analysis:
On the sample chart, we've to use a candlestick chart. That mainly because technical analysis use charts where it will be easiest to view historical data. Observe the previous market data and look for notable trends and patterns.
However, take note that technical analysis is subjective. Meaning, if both traders look at the same chart indicators, that doesn't result in the same idea and price overview.
- Fundamental Analysis
If the technical analysis doesn't fit you as a trader, the economics could be your appropriate ground. It's all about analyzing the social, political, and economic factors affecting the supply and demand of a certain currency pair.
Supply and demand impacts and determines the price of a currency exchange rate. With supply and demand, you could indicate the price movements. But it will never be an easy analyzation.
Making it simple, you may look for various factors and find out which is the winning economy and which is the losing economy.
The very concept of fundamental analysis is if the country's current and future economic outlook is positive, that currency is likely to strengthen. If the country's economy is optimistic, foreign businesses and investors will be attracted and invest in the country.
In short, foreign businesses and investors are to purchase that country's currency to obtain their optimistic and developing assets..
- Sentiment Analysis
Each has his/her own opinion within the market. Each has a question of why the market moves in its way. How will it react? And how each decides whether to trade in the same market or against it.
Fundamentally, the market indicates what and how the traders feel about it. Each position a trader takes indicates his idea about the market. The overall result shows the whole sentiment of the market no matter what the information is.
Wise traders consider all the sentiment analysis before concluding if the market is bullish or bearish.
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