The Analysis to Use on the Foreign Exchange Market

Foreign Exchange Market Analysis

This article looks at the analysis that you can use on the foreign exchange market.

When you look at trading on the foreign exchange market you need to consider the analysis that you are going to use.  There are two ways that you can analyse the foreign exchange market and this is through technical analysis and fundamental analysis.  There are many people who are unsure about which analysis method they should be using.  It is important that you know about the analysis that you should be doing and how you should be doing this.

Technical or Fundamental Analysis

The first point that you have to consider is which analysis method you want to use.  To do this you should determine what you will have to do with each of these methods.  When you complete technical analysis you are going to be looking at the forex charts and determining what the future movements of the market will be based on this.  With fundamental analysis you will be looking at the forex news and determining what the reaction to the news will be and how this affects the movements on the market.

Using Both Analysis Methods on the Foreign Exchange Market

What many traders do not realise is that you can use both of the analysis methods to trade.  When you do this you have to know which analysis method you will be using for the different aspects of trading.  The basis of this analysis will be to use fundamental analysis to trigger your trade and technical analysis to determine your enter and exit points.

When you use a combination of the analysis methods you need to know what you have to do.  The first step will be to complete fundamental analysis to determine when and what you should be trading.  This means that you are going to look for forex news that affects the market and determine what the reaction movement is going to be.

Once you know about this you are going to switch to the technical analysis.  The technical analysis that you complete will verify that there is a movement you can trade on and what your points for the trade should be.  The verification of the movement will be done with the use of technical indicators that look at movement momentum.

When you look for the entry and exit you are also going to use technical indicators.  The technical indicators do vary depending on the type of trading you are looking at and the indicators that you are most comfortable with.  If you are comfortable with the use of moving averages then you should use these indicators instead of another like the Bollinger Bands.

The Problem with Combined Analysis

The use of combined analysis will not always work.  If you are not going to be trading on the trend then you could have a problem with this analysis method.  Fundamentally determined trading generally works on the trends and you should consider this.  If you are going to be looking at range trading then you should stick to the technical analysis and use this as your only form of market analysis.



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