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Understanding the Forex Market
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The Forex Market is a global financial community where money is taken away from the curious and undisciplined traders and handed over to the disciplined and patient traders. This is called the art of marking smart money. To remain profitable in the forex market, every trader must understand the factors that move the market, popularly known as Fundamental and Technical analysis. News and previous price actions constitute the meaning of these two respectively; and the duo synchronistically move the market in the most significant ways.To get more news about FXCM, you can visit wikifx.com official website.
What is Forex Trading？
The word Forex is an acronym for Foreign exchange. Forex Trading offers investors and travellers the opportunity to safeguard their accumulated wealth against devaluation and inflations. The Forex Market is therefore a global market where a particular currency pair is bought against a perceived weakening currency inorder to profit from the weakness of the opposite pair. Forex is the safest way to safeguard one's money against inflations and hiking.
What is Forex Analysis？
Forex Analysis is a systematic study of the market movement pattern by investors as to determine which pair of currency to either buy or sell. It is the process of decision making on which position to take in the market as to make profits.
Often these analysis could be technical in natur; using resources such as charting tools or can be fundamental in nature, using economic indicators and/or news-based events.
Types of Forex Market Analysis
There are basically two ways of analyzing the Forex Market called the Technical and Fundamental Analysis. These two offer seasoned guide on the possible direction to expect in the market.
A. Fundamental Analysis:
Fundamental Analysis is otherwise known as daily news and events that move a particular currency so much. Such movement could either be positive or negative and moves the market in either way. Fundamental analysis is often used to analyze changes in the forex market by monitoring figures, such as interest rates, unemployment rates, gross domestic product (GDP), and other types of economic data that come out of countries. Other events such as politics, crisis situation and upheavals greatly affect the value of a Country's currency and investors always paid attention to these events in deciding which currency to either buy or sell.
B.Technical Analysis:
This is the study of previous price movement patterns in deciding which direction the market will follow at each point in time. The major assumption here is that the market having moved severally in a particular way under different conditions, is most likely to repeat same movement when given a similar conditions. Hence, technical analysis comes in the form of both manual and automated systems.
Understanding Forex Market Analysis:
It's important to think critically about the tenets of forex market analysis. Here is a four-step factors to always consider.
1. Understand the Drivers.
The art of successful trading is partly due to an understanding of the current relationships between markets and the reasons that these relationships exist. It is important to get a sense of causation, remembering that these relationships can and do change over time. A lot of factors especially those we have mentioned above move the market. Therefore the first questions to ask are: Why are these things happening？ What are the drivers behind the market actions？ What effects will they have on the market.
2. Chart the Indexes
It is helpful for a trader to chart the important indexes for each market for a longer time frame. This exercise can help a trader to determine relationships between markets and whether a movement in one market is inverse or in concert with the other. Longer time frames as Daily, weekly and monthly are most suitable in analyzing the market.
3. Market Sentiments
The way traders have reacted to a particular event or news in the past often determined their future reaction to it. Therefore it is very important to understand how the general traders feel over a particular Economic event.
4. Time the Trades:
Every trader must be careful to enter the market at the most rife moment to avoid losses. Often strong Support and Resistance points have remained the most profitable region for entering the market. There is a much higher chance of a successful trade if one can find turning points on the longer timeframes, then switch down to a shorter time period to find a better entry.