Forex Analysis Methods, What to Choose?
Which of the forex market analysis methods to choose from? In this article, we are going to answer one of the most challenging questions!
As you learn to trade and communicate with brokers in the forex environment, you will find ardent supporters of one of the three forex analysis methods. But don’t be tempted to look one-sidedly at the market! Each analysis method is no better than the other; they are just different views on one object – the market.
Of course, it is better to trade based on the type of analysis you are more familiar with, which is more convenient and profitable. To summarize, the technical analysis examines price movements on charts, while fundamental analysis examines a country’s economy. Market sentiment analysis looks at whether the market is currently set to rise or fall in the current perspective.
Fundamental factors shape the sense of market, and technical analysis helps us visualize those feelings into an accurate action strategy. All three forex analysis methods work hand in hand and help you find excellent and profitable trading ideas. For all of this to work well, you must continuously practice and improve your analytical skills!
To become a long-term successful currency trader, you must know how to effectively use all three forex analysis methods. Don’t believe us? Let’s take an example of how using only one type of analysis can turn into a trader disaster.
Let’s say you look at a chart and find a good trading opportunity. You envision a stream of dollars falling from the sky. You say to yourself, “I’ve never seen such a super signal on GBP / USD before. My charts never lie to me. I guess I’ll make some money today! “And you buy GBP / USD with a big smile on your face. But suddenly, the currency pair is down 100 pips against you. It turns out that one of the major London banks filed for bankruptcy, and everyone is disappointed in the pound and continues to sell it. The pound is down! The smile disappears from your face, and you start to get angry with technical analysis and your charts.
What is the reason for the failure?
The reason is that you have ignored the signals that were given by fundamental analysis and analysis of market sentiment. We hope this will not become a real story but will remain a fiction. Of course, this story is somewhat exaggerated, but you understand, we, like your parents, will not advise bad things. Therefore, remember this story when you decide which type of analysis to use. Don’t rely on one type of analysis. Instead, it would help if you balanced using all three types of analysis so that you can expect a high probability of success.
What’s next?
Now that you know the basics, it’s time to dive deeper into market analysis. That’s precisely what you will be doing for the next few years of your Forex trading life.
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