The market in question deals with 53 times more money than the New York Stock Exchange. Recent studies have shown that among 43 million traders in the span of 2014 to 2015, more than 50% have ended their trade on a profit. This happens when you are able to carry out proper market analysis and resort to forecasting. But future prediction is not about reading forex currency charts only as there are certain aspects and avenues that are not disclosed by these technical tools.
Every financial market takes into consideration two basic assumptions. First, the market will always follow a certain trend, and second, history will repeat itself. Based on these, years of data are collected and future currency trading charts are formed. Generally, tools like moving average are utilized to form such data. Certainly, forecasting in this method is purely technical and misses out on certain aspects that affect the market as well.
Here is a list of three things that forex currency charts fail to reveal.
- Currencies fluctuate according to time-zones
Foreign exchange market works in sessions. There are mainly four, Tokyo session, Sydney session, London Session and the New York session. Each session function according to their respective country's time zones or working hours and not all of them operates at the same time. It is then fair to conclude that Australian Dollar will show greater fluctuations during the Sydney session and trading in this will be a bit easy in this time span.
The technicality of forex currency charts fails to depict this. It will only show that Australian Dollar is stagnant at a particular quote during the Tokyo session and you will never know the reason behind it.
Also, currencies show most liquidity during a session overlap. This scenario will also not be revealed by plots and forex currency chart live.
- Global events affect the currency market
Almost all global and economic event affect the market and “forex charts currency charts" fail to take this into consideration. They are developed on historical data and trends and any recent event does not get reflected in those plots.
For instance, Britain recently voted out of the European Union. This saw Great Britain Pound plunge to its all-time low rating against US dollars. Brexit also means that EU will no longer receive money from Britain for its annual budget, which saw Euro's valuation decline as well. These events will never get captured in currency trading charts.
- Interest rates also affect a currency’s valuation
Strong economies like the US and Japan lend out their currencies at low-interest rates. These allow foreign investors to borrow these currencies and invest into some high-interest currencies. Also, low rates attract foreign business into that country which appreciates the country's stock and good's valuations.
This, in turn, appreciates its GDP. A high demand for a particular currency appreciates its valuation. Now, forex currency charts live may foresee this trend up to a day maximum but it cannot predict the market based on this well into the future.
Technical analysis is definitely necessary, but other factors should be considered as well. Combine global news with forex currency charts and indicators and see your profits multiply. Remember, one forecasting tool is never sufficient in this huge market.