As you may well be aware of already, forex stands for foreign exchange, and is the trade market for currencies. The appeal behind it is that it’s the largest market in the world, with an average of trillions of dollars being traded every day. All the currencies from all the countries in the world are traded on the forex market, which makes it the most liquid market existent. And, on top of that, anyone can participate in the trade. However, it’s advisable that you do a little forex trading analysis before getting started on the market.
There are three main types of forex market analysis you need to master in order to become an expert trader with a high success rate. They aren’t ranked in any particular order; all of them are equally important. Therefore, before hitting the market, we strongly recommend you study these three types of forex market analysis and try to understand them and apply them logically. If you do so, your profits are bound to increase faster than you may have initially imagined. Forex trading can be a very rewarding endeavor if you remember to do it right and play by the book.
#1 Technical Analysis
While we did say in the beginning of the article that all these three types of forex market analysis are equally important, if one of them were to have priority, it’s technical analysis. Technical analysis functions as the framework for price movement studies conducted by forex traders. In theory, this works in the following way: by looking at the history of price movements, you can determine current trading condition and price movements. In a nutshell, technical analysis works on the assumption that history repeats itself.
#2 Sentiment Analysis
Forex trading analysis based on sentiment consists in starting at the premise that traders don’t all act alike, due to various opinions each and every one of them holds on issues concerning the market. Going into the game with this knowledge gives you an extra chance at success. If it helps, think of the market like a financial Facebook. Everyone shares according to their own opinion, and no two opinions are alike.
#3 Fundamental Analysis
This type of forex trading analysis is a particular way of looking at the market through an analysis of political, economic and social contexts alike. This needs to be done in order to properly understand supply and demand, which are naturally driven by these three fundamental forces of today’s world. Supply and demand in turn determine the exchange rate, therefore it’s good to put your money into countries with a good economic situation that also seems sustainable in the future due to a thriving political and social context.
