3 Core Areas of Forex Analysis

Traders should consider a range of analysis before entering markets to be as well informed and prepared as they can. A successful trader stands out from the crowd by using a blend of analysis available to them.

There are 3 core areas of analysis.

1. Fundamental

This focuses on data and the supply and demand of an asset. In terms of Forex, this can have a massive impact on the exchange rate of certain currencies. Traders can look at a country's GDP, employment rates and current political stability within a country and decide whether to long or short based on this information. For example, Great Britain leaving the EU resulted in GBP losing 10% of value in a single trading day.

2. Technical Analysis

This is the study of historical price movements on any particular currency pair. Technical analysis looks at current price action in the market to determine which way the market will move. Traders make use of charts as an indication of whether markets will stabilize, upturn or downturn by using historical data.

Technical analysis is subjective and depends on which charts are being used and indeed, who is reading the charts and analyzing the data.

3. Sentimental

Market sentiment is the overall feeling of how a market is behaving and how it will perform based on how many people are entering a market position at a certain time.