There are two major methods used to analyze and
forecast the behavior of the Forex market - Technical (chart) analysis
and Fundamental analysis.
Forex
Fundamental analysis is a type of market analysis which involves
studying of the economic situation of countries to trade currencies
more effectively. Most FOREX traders rely on analysis to make plan
their trading strategy. The other common form of analysis is technical
analysis.
Both
are distinct in their own ways, but on the other hand both are
considered useful forecast tools for any Forex trader. They work
towards the same goal - in predicting price or movement of currency in
the forex market.
In
technical (chart) analysis trader studies the effect while the
fundamentalist studies are about the cause of market movement. The more
successful forex traders have been seen to combine both types of
analysis for results that are fine tuned further.
Forex
technical (chart) analysis, forecasting price movements & future
market trends are based in charts study of past market action. Forex
technical analysis is more focused on what has actually happened in the
market, instead of what should ideally happen. It takes into account
the price of currency and the volume of trading, and then charts are
developed from such a data which is used as its primary tool. One big
advantage of technical analysis is that the forex trading analysts can
follow many markets and are capable of trading currency simultaneously.
Chart analysis is built on some basic and yet crucial principles.
- Market action discounts everything!
- Prices move in trends
- History repeats itself.
There are five categories in Forex chart analysis theory:
- Indicators (oscillators, e.g.: Relative Strength Index (RSI)
- Number theory (Fibonacci numbers, Gann numbers)
- Waves (Elliott wave theory)
- Gaps (high-low, open-closing)
- Trends (following moving average).
For
an aspiring forex trader, learning technical analysis skill is a major
factor and her/his success depends on his in-depth knowledge to a great
extent. One should also study about the Forex technical analysis tools
while studying about Forex technical analysis.
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2009 - Vahid is a forex trader and forex market analyst. Hiswebsite is
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