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Analyzing the forex market is like having a trading plan, buying and selling an asset. With the market fluctuating constantly, the brother’s understanding of the market will help the trading get good results. In forex that asset is currency.
Specifically, when it comes to the forex (or forex market) market. Forex market analysts will use a variety of ways. But the purpose is all to analyze trends or predict market movements.
Watch now: What is the Forex market? Is Forex a multi-level scam?
What is forex market analysis?
Forex market analysis A combination of basic technical or emotional methods to have the most complete view when investing in money. Specifically, here is a look at the market situation and related issues.
The analytical method used must firstly suit each person’s trading style.
There are quite a few ways to analyze the forex market. However, we need to keep a simple transaction method, and apply successfully. That helps you to have better trading opportunities.
CHK will provide you with the 3 most popular forex market analysis including: Fundamental analysis, technical analysis and emotional analysis. Not a long line to go straight to the problem.
Watch now: What is technical analysis? Detailed instructions for beginners
Fundamental analysis in forex is a method of describing a transactional action based on the global aspect affecting the supply-demand index of a currency. To determine the potential trend of currency on behalf of a country. Specifically, special economic and political factors such as interest rates, inflation, economic growth, war, …
How to apply fundamental analysis
Major political events or changes in the economy always directly affect a country’s monetary needs. It is understood: A currency may work well in the present time, but it is not certain that it will perform well in the future. Because it is always influenced by the factors mentioned.
The difficulty of fundamental analysis is the assessment of factors affecting the supply-demand index. You have to understand why when something like the Covid-19 translation, war, .. happens, affects the economy and monetary policy.
The more prosperous and promising a country’s economy is, the more valuable that country’s currency is. The next step will attract foreign investors to access that country’s economy. From there, they have to buy the currency of the country they invest in to spend on all kinds of assets.
A good example of monetary value is that the US Dollar is very valuable because the US economy is thriving.
Technical analysis in forex is a method of studying the price movements on the charts of a forex currency pair.
Or is also the historical price action research method to identify patterns and determine the probabilities of future fluctuations in the market through the use of technical studies, indicators and many other analysis tools.
It can be summarized as follows: Technical analysis method mainly used to identify trends and identify support and resistance levels using reasonably customized charts and timeframes.
The forex market has 3 ways to go: up, down, sideways (sideways).
Technical analysis is the opposite of fundamental analysis. In the fundamental analysis, it only refers to the economic and political issues that affect. And technical analysis uses tools and concepts to study currency prices.
Is technical analysis important?
Of course it is important. Not only help you find entry and exit points to the market. improve profitability. Also helps to research many other markets for example electronic money also.
Key tools in technical forex analysis
You can see it includes 3 types:
- Theory: Elliot wave, Fibonacci numbers, …
- Charts: Trends (up, down, sideways), Candlestick chart template, support and resistance, trend line (Trendline), ..
- Indicators: Stochastic indicator, moving average (MA), Moving average converging divergence (MACD), Bollinger Bands, …
How to use technical analysis effectively
This is off the table. As I have introduced, to succeed in technical analysis is: Choosing for yourself the right tools that you can access well.
Or if you work in groups, maybe each of you can master some specific tools. Then combine together to filter bad signals and give trends to identify better trading opportunities.
Gradually the analysis will become more professional if you know it well.
Forex market sentiment analysis
Analysis of sentiment in forex is a method of assessing traders’ feelings about a particular currency pair. Or their thoughts on the direction of that currency. Forex market sentiment refers to the general feeling people feel when participating in this market.
Apply effectively to transactions
Based on the stated point of view they make a decision whether to buy or sell this order. Ultimately the direction the market will take will be based on the opinions of all market participants.
A simple example: As a retail trader. Even though you have a strong feeling that a transaction will go in one direction or the other. You alone cannot make the forex market move in a direction that benefits you.
Do not misunderstand that emotional analysis will help you find specific entry and exit points. Only through that analysis did you decide whether you should follow that trend.
Anyone entering the forex market needs to perform an emotional analysis. It is up to each person to judge whether the market is going up or down. And whether to go with it or not.
Is emotional analysis important?
Should not ignore the market sentiment, I strongly advise. That’s why I put it down here.
Emotional analysis is very important. Each trader has his or her own opinion on why the market works its way. And whether to trade in the market or against the market.
Knowing how to use emotional analysis will help you have a good analytical method for the profession. Because sentiment it will become an important component of the force that has driven the forex market movement.
If the trader takes a positive attitude toward a currency pair, the sentiment can also be positive. On the other hand, if the attitude is poor, the mentality is likely to be negative.
As a trader, it is your responsibility to identify the dominant emotions in the market. Investors are optimistic about a country’s economic situation.
Analysis tool forex market sentiment
Sentimental analysis in the forex market requires the brothers to determine the positions of traders to know how they are thinking about this currency pair. From there make a suitable transaction decision.
Forex traders can use the following tools to measure market sentiment:
Commitment to traders reporting (COT)
Commitment to traders reporting (COT) The report provided by the Commodity Futures Trading Commission (CFTCEvery Friday. The location-based data is held on the previous Tuesday.
Example for easy to understand: I placed an order to buy a currency pair when the market is very bad, making its price very low. Conversely, when the price has risen to an unsustainable level due to decreased upside pressure. Then I can place an order to sell that currency pair.
Traders who follow the opposite index often go against the basic trading rules: that is, always trading in the dominant trend. If the market is trending, opposition followers believe it is time to reverse their orders and therefore will not place a trade in the direction of the trend.
But this is not always true. The market is sometimes really bleak, but it can still move on in its mainstream. Should be disciplined and comprehensive analysis, not from the personal point of view exists in the forex market.
Which forex market analysis method is best
In my opinion, it should not be said which is the best trading method. Or ask which transaction method is most effective. But think about how to apply these methods.
However, each method should still be refined to suit the trading style. For example, in technical analysis, you should only choose suitable analysis tools.
Specifically, when I participate in forex market analysis, I will summarize the plan as follows:
- Find out the relationship between the market and the current economic and political issues. This is observed every day through the news (you follow news on CHK updated daily).
- Charting and observing: Compare currency pairs, one market with another,….
- Use technical analysis tools. Tools to measure market sentiment.
- It takes a lot of time. The concept of time can be: the use of long timeframes in technical analysis. Or talk about waiting and patience in forex trading. All also contribute to forming the definition of the time I speak.
Any method is good, also effective. Reading the theory is quite easy, and applying it is difficult. And it is important to combine all the meticulous information you have provided.
Hope the article helps you understand that forex trading takes a lot of time and skills. So if you want to join the market, you should read this article plus watch news on CHK offline. Thanks!
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