Foreign Exchange or FX in short is one of the most lucrative investment ventures on the planet. Millions of Dollars transact every single day. Previously this was a market which was only meant for large-scale financial corporations, hedge fund establishments and highly rich individuals. However with a shift in phase and more conveniences available over the internet, everything changed drastically. Wait… not everything, rather there is one thing which still stands constant and that is the importance of the Forex market and the trader analysing its each and every variable.
Most venture veterans’ state that it is one of the basics of FX trading as without market analysis, no trader can secure profits. Those wanting to get into the market obviously don’t have much knowledge about market analysis.
To Start off- 2 Modes of FX Market Analysis
Technical Market Analysis
This is the mode which is preferable by most experienced traders. Technical analysis involves using technical trading instruments and analytical objects. Traders attempt to forecast future market movements by referring indicators of price movements and volume. Some of those popular technical analysis instruments include MACD, Stochastic, Fibonacci, Bollinger Band and Moving Average.
Fundamental Market Analysis
This method mainly involves evaluating the value of a currency pair with the use of economic and financial qualitative and quantitative variables. Some of those factors include Consumer Price Index, Unemployment Rates, Inflation Rates, Gross Domestic Product and many others.
The end objective of fundamental market analysis is producing a quantitative value which gives better insights of Forex market and the traders understanding of Bearish and Bullish scenarios.
SO FAR SO GOOD…! Now let’s explain 2 more aspects of FX market and what traders need to ensure.
Understanding that Market Trend is A Friend
There are quite a few factors which work in FX but cannot be quantified or for that matter measured accurately. This is more so when the market is experiencing significant amount of volatility. That being said, traders do need to understand those factors which could help put the odds in their favour.
Considering this importance of the Forex market and the trader analysis, experts always suggest understanding the market cycle. Owing to human behaviour, there are some traders which tend to repeat itself. If one does learn to interpret those trading cycles courtesy their graphs and forecast the up-approaching situation, they will attain success.
Those wanting to become a proper market trader Forex needs to gain familiarity conceptually as well as identifying them in charts to know
Higher Peaks and Valleys
Range Bound Movements
Falling Peaks and Troughs
Sorting out Seasonal Trends in FX market:
When trading currencies there are 2 choices roads which traders can opt for! One is Pro-Dollar and the other being Anti-Dollar. As obvious most dream of going for the former but unfortunately end up going in the latter.
Experts in regards to this opine that sorting out all seasonal trends in the market also does help their winning chances in many ways.
For example- July is one profitable month for trading USD and JPY. 8 samples of the last 10 prove this fact. Though there are no such reasons explaining the reason, experts’ state it could be because it is the end of the 1st Q of Japan or beginning of the 2nd Q of USA. They also suggest keeping trades short rather than the other way round.
The significance of the Forex market and the trader wanting to analyse it properly surely needs to keep all these aspects in mind.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.