Trading the Forex Exchange

Market Analysis

When trading the Forex exchange, you can use three different methods for analyzing the market. Neither method is necessarily superior to the other, but they can all have some advantages and disadvantages depending on your trading strategies. Here are a few things to consider about each of the three methods.

3 Types of Market Analysis

As the headline would seem to indicate, you can find three different methods to analyze the Forex market. When you get involved in the market, you can potentially use all three methods to your advantage. The three methods are:

- Technical analysis
- Fundamental analysis
- Sentiment analysis

Technical Analysis

The basic idea behind technical analysis is that you can look at a chart of the price history of a currency pair and accurately predict what it will do in the future.

If you believe in this method of analysis, you essentially think that history repeats itself and you can find a pattern in the price of a currency pair.

People who use technical analysis have to look at charts and use indicators to try to predict what a currency pair will be of. If you trade with an expert advisor, it most likely uses technical analysis to predict what will happen and then place trades for you. Forex technical analysis is one of the most commonly used methods of analyzing the market.

Fundamental Analysis

With mental analysis, you have to look at the underlying factor that move the price of a currency. When you look at economic factors such as the strength of the economy of a country, you can attempt to predict what it will do against other currencies.

For example, when the United States economy is performing poorly, you might expect the US dollar to depreciate in value against other currencies. If you were trading the GBP/USD pair, you might buy the pair since you expect the USD to go down.

Sentiment Analysis

Another factor that you have to look at is the market sentiment. If you can successfully analyze the sentiment of the Forex exchange market, you can often times predict what will happen with a currency pair.

Even though technical analysis can help you spot trends and fundamental analysis can tell you what should happen thanks to economic indicators, you never really know what other traders are thinking. When traders are pessimistic about a particular currency, this will be reflected in the Forex market.

When you place a trade in the foreign exchange markets, the price might move higher or lower than it should thanks to what the majority of traders in the market feel.

You can get a general feel for what other traders thing by looking at news releases, forums, polls and other information that is designed to gauge the market.

Which is Best?

There is not really a right or wrong answer when it comes to choosing a form of analysis for the Forex market. Many traders use only technical analysis and end up getting burned when a big news announcement comes out. You really should try to pay attention to all three variables, if possible.

Return From Forex Exchange to Forex Market

Return From Forex Exchange to Forex Trading