If you are looking into foreign exchange (forex) as a venture you want to take to make good money online, you may have heard or read somewhere else that one of the keys towards succeeding in the foreign exchange market is forex market analysis – analyzing trends and factors that affect the movement of currency values.
There is more to foreign exchange than buying when the price is low and selling when the price is up. Forex traders use forex market analysis to be able to predict possible movements of the price. If you are a forex investor who can correctly predict the rise of the price of the currency that you are trading, then you can gain profit, and on the other hand, if you fail with your predictions, you can lose money as well.
In foreign exchange, two types of forex market analysis are usually done to be able to predict the future movements of a currency’s price. The technical analysis digs into the value of the currency for over a period of time and analyzes the trend or common patterns of the rise and fall of a currency’s value, which can be a basis of your buying and selling.
In technical analysis, you will be needing charts on price trends as well as data on currency values, algorithms and basically numbers or quantitative data of currency movements. In charting, you have to identify and analyze the peaks and troughs in the trend of the prices. You have to identify patterns as well that can help you predict a shift of the trend. With this, you will be able to determine the currency’s general direction and base your trading strategy on it.
However, price trends and patterns are not just the only indicator of a possible rise or fall of the currency’s value. In fact, economic and political factors greatly affect the value of the currency, thus aside from these quantitative data, forex market analysis may also dig into the social and economic factors that influence the price of the currency. It may involve analyzing the country’s economic status, current political situation as well as government policies.
In the fundamental analysis, there are several concepts that are taken into consideration to analyze the currency market. Inflation or the rise in the general prices of commodities, for example, is one of the elements of the economy that can affect the value of the currency. If the economy also has high interest rates, this will also mean a higher value of the currency as the investors will come in and try to gain high returns.
Most importantly, the GDP or gross domestic product of a country is one of the key indicators of the country’s economic performance and a rise and fall in the GDP can also lead to a rise and fall of the interest rates which in turn affect the change in the value of the currency.
Keep in mind that these two methods in forex market analysis is necessary if you want to be successful in the currency market. With the help of technology, you can also automate technical analysis by using a software that you can run in your computer and provide you with quantitative data on market trends as well. This will free more of your time and allow you to make wise decisions in your trading.