Best Technical Analysis And Fundamental Analysis Forex Market Tips You Will Read This Year

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technical fundamental analysis forex
Technical and Fundamental Analysis of Forex Market

                                                         

Basically, there are two types of analysis followed by traders in the forex market – the Fundamental Analysis and the Technical Analysis. While fundamental analysis predicts movement of price of a currency on the basis of evaluation of political & economic developments, economic reviews and economic announcements by the governments of those currencies, technical analysis primarily depends on recognition of patterns on a price chart. In technical analysis various types of charts/graphs are created on the basis of the price trend of a currency. Traders look for various patterns in these charts/graphs such as single head double shoulder, double heads double shoulders, double bottoms, triangles and many more.




Features of Technical Analysis :

#1) Technical analysis believes price movements are actually a result of a number of market forces such as Political developments, Economic factors, Change in the supply & demand, Seasonal fluctuations and all other decisive factors that influence the price of currencies. Technical analysts are concerned with the movement of the price and not with why the market moves.

#2) There are numerous market patterns that are linked with various trends and the currency prices in the forex market follow these trends.

#3) Historical trends always prove to be a crucial factor to predict movement of price. It has been discovered by careful analysis of data of the forex market over the years that human reactions to certain circumstances are part of human psychology leading to the basis of these patterns.


(adsbygoogle = window.adsbygoogle || []).push({}); Technical analysis is more popular than fundamental analysis among traders as the later requires a high degree of knowledge of economical and political affairs of a number of countries which is very difficult for the common traders to obtain. On the contrary, technical analysis may be applied to various currencies and markets simultaneously.

To be successful in the forex market you need to have your own unique strategy and it is not known which strategy will work best for you. On the other hand, it has been proved technical analysis may be applied effectively to predict changes in price movements.

The tools of technical analysis in forex market are almost similar to the tools used by traders in stock market. Traders in forex markets enter and exit a trade on the basis of support & resistance levels of various patterns in the charts just like traders in stock market.

Read : Forex Strategies

Various charts, graphs, technical analysis and data are available online against a price. How these tools will be of use to traders depends on individual knowledge and experience of a trader. Also, software is available to help the traders to implement their strategies with the help of these online tools. Herein, comes the need of a comprehensive training before entering the forex market.

Read : Where To Find A Good Training In forex

The charts, data, technical analysis and software cannot make profit for you independently. It involves a lot of expertise, knowledge and experience of the traders to make use of them. Therefore, before actively taking part in forex trading, just ask yourself if you have gained enough knowledge and confidence to do it. This is for your own safety.


(adsbygoogle = window.adsbygoogle || []).push({}); Although, technical analysis is the easiest and most common method used by numerous traders all over the world, like all other things its has got both merits and demerits. Being fully aware of these will make the trader more confident about this system.

Merits

  • Technical analysis is concerned with charts & tools only and never attaches importance to any other less precise factors, so it’s the easiest to follow.
  • Technical analysis indicates what the price of a currency pair might be based on what the market is doing today and never with what the market might do
  • Technical analysis is very helpful in indicating to the traders about basic things such as — when to enter the market and when to exit, number of lots to trade at any one time and amount of money put to risk on each trade. So it’s very precise
  • Sometimes, technical analysis indicates the end end of a trend before it actually appears thus helping to keep the losses at minimum

 Demerits

  • Sometimes, it might be risky and foolish to indicate tomorrow’s price trend based completely on today’s trend because there might be so many other forces at work tomorrow
  • Beginners and inexperienced traders may fail to pick up the signals of a change in a trend timely thus losing about one third of the fluctuations in the price of a currency
  • Acting on a pattern prematurely or failure to act on a timely manner may make the trader vulnerable to lose money