How to Analyse Forex Market for Optimum Results

Forex trading is all about the analysis you carry out before determining your buy and sell decisions for a particular currency.

If you want a successful trading experience in the foreign exchange market, you need to have a firm grip over the analysis you carry out. If you are a beginner, we suggest you start using a bot like The Luxe EA first and keep on building your chart analysis capabilities side by side. 

You can also get accustomed to using various charting tools and economic indicators, which are beneficial in the long run.

Types of Forex Market Analysis

There are three basic types of analysis in Forex trading. Let’s have a quick look at each one of them individually. 

1.        Fundamental Analysis

Economic data such as rising or falling interest rates, unemployment rates, and gross domestic product (GDP) play an integral role in carrying out fundamental analysis in the foreign exchange market. 

For example, if you are analysing the chart of a currency pair i-e EUR/USD, you will have to keep an eye on the current affairs of that Eurozone, which would ultimately impact the economy.

The traders who opt for fundamental analysis are always up to date on news releases from each country. Then they may assess the connection between those news releases and the state of the currency.

 2.       Technical Analysis

As the name suggests, technical analysis is a combination of manual and automated trading analysis which relies on the historical movement of prices to forecast the future trend of the market. 

What is meant by manual trading analysis is that it involves the use of technical indicators on the currency charts and then interpreting those charts to arrive at a buy or sell decision.

In automated trading analysis, the Forex trader often programs the trading software such as The Whiz EA to look out for specific conditions and then go for buy or sell choices. Through this method, the influence of human psychology and behavior on trading decisions is eliminated.

3.        Sentiment analysis

This is another extensively used method for the analysis of Forex markets. In sentiment analysis, you need to observe the overall market sentiment, also called the “trend.” 

If it is slightly towards one side, either upwards or downwards, this indicates that most retail traders already have opened positions in that same direction. But this doesn’t always work, and you must take trade by keeping in mind the “demand” and “supply” in the market, which can often cause a strong unexpected pullback. 

Tips to Implement your Forex Market Analysis for Optimum Results

Implementing the analysis is the key if you want to succeed in Forex trading. We have enlisted a few tips that you can keep in mind.

• Identify the key drivers of the Forex market which cause significant fluctuations in the movement of a currency
• Specify the time for your trades strategically and determine entry and exit points before opening a position
• Adopt a consistent methodology and stick to it
• Have a reasonable risk-to-reward ratio
• Choose the timeframe for analysis according to your trading plan
• Practice patience and discipline, and don’t let greed come in your way of Forex trading

Final Words

Although Forex trading may seem like an easy job, it involves a lot of details that you can’t ignore if you are hoping for optimum results. Such is the case with the Analysis of Forex markets. 

It can get quite overwhelming, but you must spend a good time practicing before trading on a live account. Instead, you can get a trading bot, like The Alchemist EA, and make money while you learn.