The best way of analyzing forex market


The top 8 forex brokers in South Africa utilize the forex analysis to determine to sell or buy decisions when it comes to the currency pairs. It might be technical in nature, utilizing resources such as the tools for charting. It might as well be fundamental in nature by utilizing news based events or economic indicators. 

The type of forex market analysis

The analysis might be a concept which is ambiguous to a forex trader who is new. but it is something that falls into three types:

Fundamental analysis

It is mostly utilized in analyzing changes that happen in the forex market through having to monitor figures like unemployment rates, interest rates, the GDP – gross domestic product, and other various types of economic data which comes out of the various countries. An example is a situation where a trader who is conducting a fundamental analysis of the currency pair of the EURO/USD would find information regarding interest rates happening in the Eurozone quite useful than what might be happening in the USA. Such traders would want also to be on top of any news that might be significant which comes out of the each of the Eurozone countries to be in a position to gauge the relationship to their economies health. 

Technical analysis

It comes in both automated and manual systems. A manual system denotes a trader will have to analyze the technical indicators and interpret the data in selling or buying decision. For analysis which is automated, the trader will use a software to look for particular signals and then go ahead and interpret them in executing the sell or buy decision. Where the analysis is automated, the trader might have an advantage over the manual trader as it is intended in taking into account the behavioral economics in the decisions for trading. The forex systems are able to utilize the movements of price in determining where a particular currency might be headed to.

Weekend analysis

There are two reasons which are basic for being able to do a weekend analysis. the first reason is all about wanting to establish a bigger picture view of a certain market where you have an interest. Because the markets are closed and happen not to be in a dynamic flux during the weekend, you don’t require to start reacting to situations as they unfold, but can go ahead an survey the landscape.

On the other hand, the weekend analysis will be able to help you in setting up your plans for trading for the next week, establishing the right mindset. An analysis over the weekend is equivalent to an architect being able to prepare a blueprint for construction of a building in ensuring an execution that is smoother is able to happen. Are you feeling that you want to trade without any plan? That might be a very bad idea. To shoot via the hip might leave you with a hole in your pocket and thus, avoid it completely.

To apply forex market analysis

It is quite necessary that you think carefully regarding the forex market analysis tenets. The following are some of the steps that you have to follow:

Understanding the drivers

The art of being able to trade successfully is believed to be partly because of an understanding of the relationship that exist currently between the markets and the reasons as to why there is such a relationship. It is quite important in getting a sense of causation, remembering that the relationship can and does change with time.

An example is of a stock market having to recover might be an explanation by the investors who have an anticipation of a recovery of the economy. The investors believe that the companies are going to have earnings that are improved, and thus, valuations that are greater in the near future thereby fueling momentum which is good old greed that push prices to become too high until the larger players come on board so that the selling starts. 

The questions that you might have to ask yourself are why such things are happening and the drivers which are behind the actions in the market. 

Charts the indexes

It is quite helpful for the traders to be able to chart some indexes which are important for every market for a longer period.  The exercise might help a trader to be able to determine the relationship which exists between the markets and why a movement in one of the market happens to be in concert or inverse with the other one.

Look out for a consensus in various markets

It is possible to gain perspective of whether the markets are reaching a point of consensus by having to chart other instruments on the same daily, weekly or even monthly basis. From here, you can start to take advantage of the consensus to be able to enter a trade in a particular instrument which can be affected because of the turn of events. 

If for example the USD/JPY pair of currency indicates that there is an oversold position and the Japanese bank – BOJ might be in a position to intervene in weakening the yen, the exports of Japan might end up being affected. But a recovery for Japanese might likely be impaired without even weakening the yen.

Time the trade

There is a higher chance of a trade which is successful if one can be able to find turning points on the longer timeframes, then in the process switch down to the ones with a time period which is shorter for the entry to be fine-tuned. 

The first trade might be the exact level of Fibonacci or the bottom double as it is indicated on the chart in the long term and if this happens to fail, then a second opportunity will then crop up on a pullback or test of the level of support. Discipline, patience, and preparation will come in to set you apart from the rest of the traders who are just trading on the fly without having any preparation or the analysis of the various forex indicators.

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