One of the key indicators for a successful Forex trade is by correctly predicting the upcoming price movement of a market.
There
are various strategies that are used when trading. Some traders follow
patterns and some follow the various news to guide them in their
decision-making. But these strategies are still categorized if it uses
technical analysis or fundamental analysis. Some traders use fundamental
analysis, some use technical analysis, some even use a combination of
both.
As a trader, it is important to know this two analysis. It
can help bolster strategies which can further provide consistent profit
for your account.
Technical Analysis
Technical analysis is a
methodology that forecasts the direction of market prices through the
study of historical market data. It is one of the most common methods in
trading. This analysis is very easy to learn and it is well-known to
numerous traders especially those who prefer day-trading. Many people
think this strategy is some sort of a trading hack because of its high
probability to give profit.
This analysis uses various equations
which are applied to personal charts. These equations are known as
indicators - data that measures market conditions to calculate economic
trends. These indicators provide historical information for a particular
market. It presents the history of price actions and price volumes of
that market.
To effectively use this analysis, a trader must
understand how to use various indicators such as Relative Strength Index
(RSI), Moving Average Convergence-Divergence (MACD), Money Flow Index
(MFI), Stochastics, and many more. Profitable Forex traders often use
many indicators when trading. These indicators illustrate historical
data in a particular aspect. Despite its useful method, this analysis
does not guarantee a 100% prediction of the price movement of an asset.
Fundamental Analysis
Like
technical analysis, fundamental analysis attempts to forecast the price
movements of a particular market. One of the most popular traders who
use fundamental analysis is Warren Buffet. Traders who excel in using
this analysis claims that this methodology showcases a wider view of the
upcoming price movement of a certain market.
When trading in
Forex it is essential to learn about fundamental analysis. This analysis
presents key economic indicators of the market. It is also one of the
vital factors in analyzing the eight major currencies that are traded in
the foreign exchange market (USD, EUR, GBP, AUD, CHF, JPY, ZAR, &
NZD).
Here are some fundamental analysis traders should always
check: Central banks' Interest rate decision, Employment Reports,
Customer Price Index (CPI), and Gross Domestic Product (GDP). These
reports will always affect a currency's price.
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 the worldwide economic happenings. Being caught in
the wrong position after an economic announcement is a trader's worst
nightmare.
Are you ready to trade now? You can create a demo account or start trading with us here in Millennium-FX.
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