One of the key indicators for the success of forex trading is to correctly predict the next price movement of a market.
There are several strategies that are used when trading. Some marketers follow patterns and some follow different news to guide them in decision making. But these strategies are still classified whether technical analysis or fundamental analysis is used. Some traders use fundamental analysis, some use technical analysis, some even use a combination of both.
As a trader, it is important to know these two analyzes. It can help reinforce strategies that can provide a steady benefit for your account.
Technical analysis is a methodology that predicts the direction of market prices by studying historical market data. It is one of the most common methods in trade. This analysis is very easy to learn and is well known by many traders, especially those who prefer day trading. Many people think that this strategy is a kind of commercial piracy because of its high probability of giving profits.
This analysis uses several equations that apply to personal graphs. These equations are known as indicators: data that measure market conditions to calculate economic trends. These indicators provide historical information for a given market. It presents the history of price actions and price volumes of this market.
To use this analysis effectively, a trader must understand how to use various indicators such as the relative strength index (RSI), the moving average convergence-divergence (MACD), the cash flow index (MFI) , the stochastic and many more. Profitable forex traders often use many indicators when trading. These indicators illustrate the historical data in a specific aspect. Despite its useful method, this analysis does not guarantee a 100% prediction of an asset’s price movement.
Like technical analysis, fundamental analysis attempts to predict price movements in a given market. One of the most popular traders who use fundamental analysis is Warren Buffet. Traders who excel in using this analysis claim that this methodology shows a broader view of the upcoming price movement of a given market.
When trading in Forex, it is essential to know the fundamental analysis. This analysis presents the main economic indicators of the market. It is also one of the vital factors for analyzing the eight major currencies that are quoted in the foreign exchange market (USD, EUR, GBP, AUD, CHF, JPY, ZAR and NZD).
Below are some key analyzes that traders should always check: the decision of the central bank interest rate, employment reports, the customer price index (CPI), and gross domestic product (GDP). ). These reports will always affect the price of a coin.
Another factor when using fundamental analysis is the economic calendar. This calendar indicates upcoming economic events. As a trader, it is important to always be aware of world economic events. Being trapped in the wrong position after an economic ad is a trader’s worst nightmare.
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