Types of Forex Analysis
There are two types of analysis which are generally used by the
Forex traders to keep a track of the Exchange market. These are:
• Fundamental Analysis
• Technical Analysis
Fundamental analysis includes a detailed study of the basic and
primary elements which have and can potentially manipulate the
financial system of a certain thing. This type of technique is
often used to study and forecast the various trends like price
action and market trends. These predictions are done mainly
through evaluating fiscal indicators, public factors within a
company and administration policies.
When it comes to financial markets, fundamentals are the key.
Fundamentalists can easily tell you how did any particular market
trends occur and what will they be at the current hour or minute
and further significantly, at what time and at which price will
they be in the near future.
Market traders are divided into the two; they are either
Fundamentalists, or Technicians. But the fact is that it is kind
of difficult to survive in the Forex market with one of the two
techniques. What is needed is the right blend of the two to form a
perfect picture of the current market and price trends.
A Forex trader should always be aware of the fact that any
financial market is influenced by many factors apart from its past
trends and movements. Many issues such as political and financial
pressures, national issues and social order define to a great
extent, the way most of the financial markets move.
While Fundamental analysis is a very successful technique to
predict monetary conditions of the market, it can somewhat lack in
determining the exact market rates and prices. For example, just
by studying a financial forecast of the political and fiscal
reports, it cannot be guaranteed that you will be benefiting from
them. What is important is to know the right and accurate way to
utilize the information by setting up accurate entry and exit
points for a particular trading position.
Fundamental analysis is mostly studied using a multitude of
empirical data to devise a strategy with an effort to predict the
current market movement as well as future prices.
Technical analysts are of the opinion that factors like market
fundamentals, hopes and fears of the people need not be studied in
detail to understand the market well.
According to them, market moves in a rather predictable manner and
these moves can be predicted by studying various past patterns and
trends. Technicians believe that markets move in trends and that
history repast itself. And therefore, they are not as
unpredictable as they seem.
Technical analysts use systematic methods to predict market
movements such as price charts, volume charts, and other studies
to estimate future market values.
After doing so mush of analysis of the past trends and flows, it
becomes very difficult for the technical analysts to not rely on
their findings a 100%. After using technical analysis to foresee
the market trends, it is necessary for the traders to set up
strict entry and exit levels, and stay with their pre planned
strategies rather than deviating from it at the last moment.