Forex trading analysis is said to be an examination of the changes that occur in the foreign exchange market which are used by traders to know when to buy or sell a currency pair at any point in time. It gives information used to uncover trading opportunities on currency pairs. Forex trading analysis is simply based on analyzing the forex market for market fluctuations and movements, currency price movement, volatility ratios, and the right currency trading times. They are highly used by forex traders for a better forex trading experience.
TYPES OF FOREX TRADING ANALYSIS
FUNDAMENTAL FOREX TRADING ANALYSIS
Fundamental forex market analysis is a process of assessing a currency by a method of determining its intrinsic value, assessing related economic, financial, qualitative and quantitative factors. Fundamental forex market analysis concentrates on anything that distresses a currency’s value in the likes of macroeconomic factors. At the end of the evaluation, forex traders use fundamental forex trading analysis to produce a quantitative value which is used to compare the current price of a currency in other to determine if its undervalued for overvalued.
TECHNICAL FOREX TRADING ANALYSIS
This is totally different from Fundamental forex market analysis in that technical forex trading analysis is used to evaluate securities and ascertain forex trading opportunities by means of analyzing statistics obtained from trading events in the likes of volumes, currency price movements and fluctuations. Technical forex trading analysis uses charts (line charts, bar charts, figure charts, candlestick charts and point charts) of currency price movements and other analytical tools to evaluate a currency’s strength and weakness.
This analysis stands on the fact that all forex trading information is reproduced in the price of a currency/ security. This means that in technical forex trading analysis, analysis of the currency price is all that matters. In the process of examining the price patterns and statistics, technical analysis tries to determine the total forex market sentiment and determine where currency prices may be headed.
ADVANTAGES OF FOREX TRADING ANALYSIS
Forex trading analysis gives forex traders information on the general direction in which a currency or security in the forex market is headed (trend analysis). It also gives out information on the support level of a particular currency which is a spot where demand is stated to be strong enough to prevent the currency price from falling further, and the resistant levels are currency prices were selling is thought to be strong enough to prevent prices from rising higher. Forex trading analysis disseminates information on the volume of trades over a given period of time. Most especially, forex trading analysis provides forex traders with trading indicators that give details of volatility, momentum and money flow by using charts and patterns.
Forex trading analysis gives reliable information on when to buy or sell a currency pair and how to take profit and loss stops in trading. Forex analysis gives forex traders a high rate of flexibility to trade at any time of the day or night without the fear of capital loss or trading failure. It gives them the ability to make more precise and accurate decisions on what to trade when to trade and how to trade in the forex market. These forex trading analysis provide useful statistics on market movements and fluctuation, price movements, currency interest rates, currency exchange rates, unemployment rates of a country, Gross Domestic Product of a country and other economic releases which has a great contribution to knowing the perfect time to trade and maximize profits
SOURCES OF FOREX TRADING ANALYSIS
Forex market trading analysis can be generated from an extensive range of sources. These forex analysis are majorly news releases from sophisticated trading platforms/software which automatically analyzes the forex market and provides information on when to buy, sell and trade a currency pair, trading signals which provide access to high-quality news feeds from different market information, forex trading brokers that also provide currency pair trading news to their subscribers, the internet that gives news on forex market from everywhere in the globe, forex blogs which contain up to date market analysis written by different bloggers and lots more.
In conclusion, as mentioned above, forex trading analysis can be obtained from various forex trading platforms but in other to be successful in foreign exchange trading, a trader should be careful on the type of forex trading analysis platform he subscribes to. Before subscribing to and making use of a forex trading analysis platform, a forex trader should make sure that the basic news on forex market analysis is on time, precise and up to date. He should also make sure it uses a working signal generating system for its analysis, make sure it uses a good charting software for its market analysis, make sure it has a test run and return policy, make sure it has a day to day market analysis update and has a working trading interference.