Analysis of forex market is like having a trading plan, buying and selling an asset. With the market fluctuating constantly, you understand the market will help the transaction to achieve good results. In forex, that property is currency.
Specifically, when it comes to the forex market (or the forex market). Forex market analysts will use a variety of ways. But the purpose is to analyze trends or predict market movements.
What is forex market analysis?
Forex market analysis is a combination of selective technical or emotional methods to get the most complete view when investing money. Specifically here is a look at the market situation and related issues.
The analytical method used must first suit each person's trading style.
There are many ways to analyze the forex market. However, it is necessary to hold yourself a simple, honest trading method. That helps you have better trading opportunities.
Blogtienao will provide you with 3 of the most popular forex market analysis: Fundamental analysis, technical analysis , and sentimental analysis. Not lengthy going straight to the point.
Fundamental analysis in forex is a method of describing a transactional action based on the global aspect affecting the supply-demand index of money. To determine the potential trend of currency on behalf of a country. Specifically, special economic and political factors such as interest rates, inflation, economic growth, war, ...
How to apply basic analysis
Major political events or changes in the economy always directly affect a country's monetary needs. It is understood: A currency may work well at the moment but it is unlikely to work well in the future. Because it is always affected by the stated actors.
The difficulty of fundamental analysis is the evaluation of factors affecting the supply-demand index. You have to understand why an event like the Covid-19 epidemic, a war, etc. has an effect on the economy and monetary policies.
The more prosperous and prosperous a country's economy is, the more valuable its currency is. The next will attract foreign investors to access the country's economy. Since then, they have to buy the currency of the country they invest in to spend on all kinds of assets.
A good example of monetary value is that the US dollar is of great value because the US economy is highly developed.
Technical analysis in forex is a method of studying price movements on the chart of a forex currency pair.
Or is also the historical price action research method to identify patterns and determine probabilities of future fluctuations in the market through the use of technical studies, indicators and many other analysis tools.
It can be summarized as follows: The technical analysis method is mainly used to identify trends and identify support and resistance levels using appropriate custom charts and time frames.
The forex market has 3 ways to go: go up, down, sideways (sideway).
Technical analysis is the opposite of basic analysis. In fundamental analysis, only economic and political issues affected. And technical analysis uses tools and concepts to study currency prices.
Is technical analysis important?
Of course it's important. Not only help you find entry points in the market. improve profit. It also helps research many other markets such as electronic money also.
Key tools in forex technical analysis
You can see it consists of 3 types:
- Theory: Elliot Wave, Fibonacci numbers,…
- Diagram: Trend (up, down, sideway), Candle chart template, support and resistance, trendline, etc.
- Indicators: Stochastic, Moving averages (MA), Moving Average Convergence Divergence (MACD), Bollinger bands,…
How to use effective technical analysis
This is off the table. As I have introduced, to succeed in technical analysis is: Choosing for yourself the right tools that you can access well.
Or if you work in a team, maybe each person is proficient in some specific tools. Then combine it to filter bad signals and identify trends to better identify trading opportunities.
Gradually the analysis will become more professional if distilled.
Analysis of forex market sentiment
Sentiment analysis in forex A method of assessing a trader's feeling of a particular currency pair. Or their thoughts on the direction of that currency. Feeling about the forex market refers to the common feeling of people joining this market.
Effective application of transactions
Based on the stated point of view they make a decision whether to buy or sell this order. Ultimately, the direction the market will take is based on the opinions of everyone participating in the market.
A simple example: As a retail trader. Even though you have a strong feeling that a transaction will go in one direction or the other. You alone cannot make the forex market move in a direction that benefits you.
Don't get the wrong idea that emotional analysis will help you find a specific entry and exit point. It was only through that analysis that you decided that you should follow that trend.
Anyone participating in the forex market needs to perform sentiment analysis. It is up to each person to judge whether the market is rising or falling. And whether to follow it or not.
Is emotional analysis important?
Should not ignore market sentiment, I strongly recommend. That's why I put it down here.
Sensory analysis is important. Every trader has his or her own opinion about why the market works its way. And whether to trade by the market or how to fight the market.
Knowing how to use emotional analysis will help you have a good analytical method for the job already. Because of the sentiment it will become an important component of the force that has driven the forex market movement.
If a trader has a positive attitude towards a currency pair, then the sentiment may also be positive. On the other hand, if the attitude is poor, the psychology is likely to be negative.
As a trader, you are responsible for identifying the dominant emotions in the market. Investors are optimistic about a country's economic situation.
Forex market sentiment analysis tool
Emotional analysis in the forex market requires you to determine the position of the traders to know how they are thinking about this currency pair. From there make the appropriate transaction decision.
Forex traders can use the following tool to measure market sentiment:
Commitment to report traders (COT)
Commitment to report traders (COT) is a report provided by the Commodity Futures Trading Commission (CFTC) released every Friday. Location-based data was held earlier Tuesday.
The example is easy to understand: I placed an order to buy a currency pair when the market was very bad, which made its price very low. Conversely, when prices have increased to unsustainable levels due to upward and downward pressure. Then I can place orders to sell that currency pair.
Traders who follow the opposite index often go against the basic trading rules: that is, always trading in the prevailing trend. If the market is trending, the opposition believes it is time to reverse its order and therefore will not place trend-based trading.
But this is not always true. Sometimes the market is really gloomy but still able to continue its mainstream. Discipline and comprehensive analysis should not be done, not an individual perspective that exists in the forex market.
Which forex market analysis method is best
In my opinion should not say is the best trading method. Or ask the most effective trading method. Which should think about how to apply these methods.
However, in each method should be distilled to fit the style of transaction. For example, in technical analysis, you choose the appropriate analysis tool.
Specifically, when I participated in analyzing the forex market, I would summarize the plan as follows:
- Learn about the relationship between the market and current economic and political issues. This is just a daily observation through news (Brothers follow news on Blogtienao update daily).
- Charting and observing: Compare currency pairs, one market to another,….
- Use technical analysis tools. Market sentiment measurement tools.
- It takes a lot of time. The concept of time could be: use of long time frames in technical analysis. Or talk about the waiting and patience in forex trading. It all contributes to the definition of the time we speak.
Any method is good and works well. Reading theory is quite easy, difficult to apply. And the important thing is to combine all the good facts I've provided.
Hope the article helps you understand forex trading takes a lot of time and skill. So if you want to join the market, you should read this article plus see the news on blogtienao. Thanks!