Currency trading or foreign exchange deals with value ratio between two currencies, each tied to specific nationality/nationalities. Consequently, the number of variables affecting them is huge and even in some cases unaccountable. Thus, to account or rather predict FX, Forex analytics is of utmost importance.
The FX market is characterized by a volatility and liquidity which makes it highly profitable given that the investment is directed towards the right direction. But the sum of variables which govern it need to be interpreted and anticipated to ascertain the due course of an asset. Intuition and instinct based on historical patterns do not always guarantee a specific movement. The market has, on too many occasions, moved in directions and magnitudes which were completely against the popular forecast.
There are numerous technical analysis tools and indicators which aid in interpreting pre-determining the due course of events. These tools are based on real-time analysis and pattern analysis all clubbed together as one to pre-conceive the market curve.
Forex analytics is the process of interpreting FX and applying to trading in it. There are multiple major factors alluding to many monetary aspects. The most important ones by general consensus and allusions are as follows:
- Base Currency. Factors relating to USD and JPY are different. Firstly as they are currencies referring to two different nations with their own set of economic realities and factors. And secondly as USD is by far a more popular currency used in FX.
- Nation-specific inflation – the value of a unit currency differs with every nation. Subsequently, so does their value against another currency.
- Investor Mentality – every investment in a currency against another has an effect on its quote given that the investment is of an amount which is not negligible. Investors tend to behave in a group; their judgments tend to rollover and correspond to the market in a specific albeit wavy pattern. Elliott wave analysis deals with interpreting market tendency based on such investor behavior.
- Corporate Investments – International banks such as the Citi group, Deutsche Bank, JP Morgan Chase etc. account for more than 55% of the daily FX trading turnover. These conglomerates deal either between themselves or by themselves with the summed up investments of their clients. Deals traded by these banks average in the millions and more often than not, these banks have an adverse effect on the market trends.
There are many more factors such as crude oil prices, international commodity market, industrial growth, International relations and even monetary policies of leading nations. Forex analytics are not only limited to forecasting the market. There are unforeseen happenstances which have a radical effect on the FX market. Accounting for as many factors is what it aims at.
Top Forex Analytics Tools:
- A/D Line (Accumulation/Distribution)
- Aroon Indicator
- MACD (Moving Average Convergence Divergence)
- Elliott Wave Analysis
- Stochastic Oscillator
Each of these indicators accumulates data and direct towards specific price movements of a stock or financial asset. However it is to be kept in mind that there are variables which these computer-based tools cannot account such as global events or inflations. The best forex analytics is what a trader has in his own intuition and aptitude.
Circumstances leading to FX market fluctuations are often unperceived. Subsequent forex analytics can pre-determine future market trends and movements. Thus the only constant is profit.
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