Forex and analytics go hand in hand for extended and successful trading. Forex analysis is used by retail traders to determine whether to buy or sell currency pairs. It is highly dependent on the business or individual participating in Forex and analytics may be technical, fundamental, or even based on sentiments of the market.
• Fundamental Analysis
Fundamental analysis is often used to analyze changes in the Forex market by monitoring figures such as interest rates, unemployment rates, and GDP from other countries.
For example, a trader conducting trade analytics of EUR/USD would find information on the interest rates in Eurozone much more useful than those found in the United States. These traders would want to be updated with any new releases coming out of the Eurozone countries to gauge the relation to the health of their economies.
• Technical Analysis
Technical Analysis comes in two forms, that being manual and automated systems. A manual mode is usually a trader analyzing technical indicators and interpreting that data on his plan of action. Automated trading analytics involves “teaching” the software to find specific signals and explain them to form a plan of action.
• Sentimental Analysis
Trade analytics based on sentiment occurs when a large proportion of traders invest in a particular currency. It is a feeling or tone of a market or its crowd psychology. When a trader uses sentiment (which can be classified under bearish or bullish), they look for particularly large amounts of investment in the particular currency.
• Weekend Analysis
There are two main reasons for doing a weekend analysis. Firstly, a trader can establish a bigger picture of a specific market without the disturbance of any dynamic fluctuations since the markets are closed during this period. Secondly, a weekend analysis will help traders establish the necessary mindset and a strategy for the coming week.
There is no “best” method of analysis for forex trading between the forms of analysis. The most viable option for traders is dependent on their time frame and access to information. Also, it would not hurt to conduct a weekend analysis when the markets are not in a constant state of fluctuation.
Forex Analytics Daily
There are many daily routines done in analytics Forex traders need to know before they start their trading. Of course, basing your trade analytics on current economic news and market trends are one way, but before going about the tenets of Forex market analysis, they must consider the following outlines:
• Understanding the Market
Being successful in Forex trading can be partly attributed to the trader’s understanding of the current relationships between markets and the reasons they exist. It is crucial to get a sense of causation and a reminder that these relationships can change over time.
Before coming up with an analysis, they should ask: Why certain things are happening? And what are the drivers behind the market actions?
• Charting the Indexes
It is helpful to chart the important indexes for each market daily and on a longer timeframe. These exercises can benefit a trader in determining market relationships and whether a movement in the market is inverse or in concert with one another.
• Finding Consensus in Other Markets
A trader could gain a perspective of whether the markets may reach a turning point by charting other instruments’ weekly or monthly basis. From there, they can take advantage of the consensus to enter a trade in an instrument that will be affected by the turn.
• Timing the Trades
A trader can gain a higher chance of a successful deal if one can find turning points on even longer timeframes, then switch to a shorter timeframe to fine-tune an entry. A great start can be at the exact Fibonacci level or double bottom as indicated on the longer-term chart.
In the end, it is crucial to conduct trade analytics every day before trading. Make sure to review your open positions to make any necessary changes, review yesterday’s trades to learn from it and encourage success and thwart any more losses, and finally, identify current and upcoming news that could cause volatility. Practicing to do these days can benefit the trader in getting the appropriate mindset to trade when the next trading session opens.