Methods of analysis of the Forex market
1. Fundamental analysis.2. Technical analysis.3. The advantages of technical analysis.4. The combination of two methods of analysis.
1. Fundamental analysis
Fundamental analysis is an analysis of economic and political status of countries whose currencies are traded in the Forex market. The objective of fundamental analysis is to assess the possible impact of certain events on exchange rate movements.
Fundamental analysis involves the analysis of economic indicators. They are published regularly and provide an opportunity to examine trends in the economies of various countries. The results of these studies help to explain the current exchange rate movements and predict future movements. For example, when the U.S. is undergoing a constant growth in consumer and producer prices, which is accompanied by employment growth, the market may begin to speak of the possibility of raising rates, which in turn can lead to a rise in price of the dollar.
2. Technical Analysis
The basis of technical analysis is based on chart analysis. It is said that the schedule - is the embodiment of the fundamental factors of influence on the market.In the analysis takes into account the following postulates:
1. inside the graphics are absolutely focused all the information about the market;
2. market has a memory and, therefore, based on the fact that in the past, we can predict the future.Based on these postulates, a wide range of technical analysis indicators, whose task is to help in "predicting" the future movements of exchange rates.
3. Advantages of Technical Analysis
1. Fundamental macroeconomic analysis very difficult. In most cases, you can not take into account all factors influencing the market. Technical analysis is much simpler, since it examines only one object - a graph of the price.
2. In technical analysis of a large number of supporters who are active participants in the market. They use the same graphics, thus obtaining similar results, and making the same conclusions. This mass consistency, in turn, influences the price movement, forming it in a positive direction. Thus there is samoispolnenie forecast.
3. Technical analysis is universal - it can be used in various financial markets with little or no change.
4. The combination of two methods of analysis
Between adherents of fundamental analysis and technical analysis, there are tensions about the importance of a particular type of analysis. The first claim that understanding the underlying processes in the economy and politics is enough for successful trading. The latter say that so many events and they are so diverse, it is almost impossible to say unequivocally about their impact on the currency market.
Experienced traders who are working successfully in the Forex market, it is recommended not to neglect one or another kind of analysis. Fundamental analysis helps to understand trends in the currency market in the long run and at this point in time. Technical analysis, in turn, with the help of various tools makes it possible to visualize the current trends and to calculate the possible levels of the beginning of large movements (or their end), the magnitude of movements of a correction, and most importantly - a technical analysis to determine the levels for the opening and closing positions.
Combining fundamental and technical analysis to produce impressive results, as representing the market situation in terms of fundamental analysis, traders need only find the level for entry into the market and calculate the possible stop and limit orders.
In the market sometimes things happen that you can explain (or predict) in terms of only one kind of analysis. For example, if a given period of time there is no strong influence of fundamental factors on the foreign exchange market, the direction of the game can only say technical analysis. At such times, or the motion may continue the trend, a correction can begin to, or course will oscillate in a horizontal channel. Depending on what show trend lines and indicators of technical analysis, and decision-making occurs.
There's also another situation when the big moves can only be explained as a result of the analysis of economic or political events. A striking example of this is, of course, all sorts of crises. During such periods, often forget about all kinds of support or resistance levels and technical indicators (although a more careful analysis, and in those markets can find its technical patterns.) In this case, it is important to identify tools that are particularly susceptible to the influence of the crisis and the likely direction of their movement. When trading in such circumstances will be at the forefront of the chosen direction and the second - the various attributes of technical analysis.
1. Fundamental analysis.2. Technical analysis.3. The advantages of technical analysis.4. The combination of two methods of analysis.
1. Fundamental analysis
Fundamental analysis is an analysis of economic and political status of countries whose currencies are traded in the Forex market. The objective of fundamental analysis is to assess the possible impact of certain events on exchange rate movements.
Fundamental analysis involves the analysis of economic indicators. They are published regularly and provide an opportunity to examine trends in the economies of various countries. The results of these studies help to explain the current exchange rate movements and predict future movements. For example, when the U.S. is undergoing a constant growth in consumer and producer prices, which is accompanied by employment growth, the market may begin to speak of the possibility of raising rates, which in turn can lead to a rise in price of the dollar.
2. Technical Analysis
The basis of technical analysis is based on chart analysis. It is said that the schedule - is the embodiment of the fundamental factors of influence on the market.In the analysis takes into account the following postulates:
1. inside the graphics are absolutely focused all the information about the market;
2. market has a memory and, therefore, based on the fact that in the past, we can predict the future.Based on these postulates, a wide range of technical analysis indicators, whose task is to help in "predicting" the future movements of exchange rates.
3. Advantages of Technical Analysis
1. Fundamental macroeconomic analysis very difficult. In most cases, you can not take into account all factors influencing the market. Technical analysis is much simpler, since it examines only one object - a graph of the price.
2. In technical analysis of a large number of supporters who are active participants in the market. They use the same graphics, thus obtaining similar results, and making the same conclusions. This mass consistency, in turn, influences the price movement, forming it in a positive direction. Thus there is samoispolnenie forecast.
3. Technical analysis is universal - it can be used in various financial markets with little or no change.
4. The combination of two methods of analysis
Between adherents of fundamental analysis and technical analysis, there are tensions about the importance of a particular type of analysis. The first claim that understanding the underlying processes in the economy and politics is enough for successful trading. The latter say that so many events and they are so diverse, it is almost impossible to say unequivocally about their impact on the currency market.
Experienced traders who are working successfully in the Forex market, it is recommended not to neglect one or another kind of analysis. Fundamental analysis helps to understand trends in the currency market in the long run and at this point in time. Technical analysis, in turn, with the help of various tools makes it possible to visualize the current trends and to calculate the possible levels of the beginning of large movements (or their end), the magnitude of movements of a correction, and most importantly - a technical analysis to determine the levels for the opening and closing positions.
Combining fundamental and technical analysis to produce impressive results, as representing the market situation in terms of fundamental analysis, traders need only find the level for entry into the market and calculate the possible stop and limit orders.
In the market sometimes things happen that you can explain (or predict) in terms of only one kind of analysis. For example, if a given period of time there is no strong influence of fundamental factors on the foreign exchange market, the direction of the game can only say technical analysis. At such times, or the motion may continue the trend, a correction can begin to, or course will oscillate in a horizontal channel. Depending on what show trend lines and indicators of technical analysis, and decision-making occurs.
There's also another situation when the big moves can only be explained as a result of the analysis of economic or political events. A striking example of this is, of course, all sorts of crises. During such periods, often forget about all kinds of support or resistance levels and technical indicators (although a more careful analysis, and in those markets can find its technical patterns.) In this case, it is important to identify tools that are particularly susceptible to the influence of the crisis and the likely direction of their movement. When trading in such circumstances will be at the forefront of the chosen direction and the second - the various attributes of technical analysis.
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