To gain success in this fluctuating business landscape, it is crucial to plan for future. It is the same for FX trade investors. Forex traders will emphasize their knowledge and ability to forecast the FX market after Forex trend analysis.
What is Forex?
It is a decentralized global market that trades currencies. It is the largest global trade market that processes transactions worth trillions every day. Participants involved are foreign banks, commercial companies, investors, brokers, hedge funds, and several central banks.
How to forecast FX market movements?
The trader signs up with an online Forex trading platform like ADSS to participate in different kinds of trading activities like CFD, Bitcoin, FX, and Commodities. To gain success there is no golden rule regarding the Forex prediction formula. However, several factors drive the currency’s exchange rate movement.
- Interest rates
- Economic growth
- Monetary policy
- Import & export
- Political stability
If you monitor all the events – micro and macro, your chances of making a successful forecast increase. It is a hard task. However, you can keep track of forecasts and economic announcements related to FX.
The core skill of an FX trader is to detect the trends because it helps to forecast the movement. The trend is the normal direction asset price is moving. Trends can differ in length ranging from ‘short to long’. Trend trading is highly profitable. There are 3 kinds of trends –
- Uptrend [appreciation in value]
- Downtrend [depreciation in value]
- Sideways trend [neither appreciating nor depreciating or a stable condition]
Forex analysis types
Traders need to sharpen their analysis skills to understand price movements correctly and minimize their risks. Analysis categories are multiple but the end goal must never be forgotten. FX analysis is conducted in two specific areas.
- Fundamental analysis
Its focus is on fundamental factors like GDP, economic growth, inflation, and manufacturing. It comprises of studying the financial strength of different countries to make smart FX forecasts. You get information regarding economical events and political stability that drives the FX market. For instance, a politician gives a solid speech that includes statements and statistics. It can seriously affect the economical market movements.
Economists have designed an economic calendar, where daily predictions are made based on recent history’s economic values. The announcement of certain economic figures has a huge impact on FX market prices. They are employment situation, interest rates, GDP, and budget.
The trader must always check the economic calendar because it finally becomes a catalyst for future price movements.
- Technical analysis
The past market data gets examined to forecast future changes. The concept is that history possibly repeats in a predictable pattern. Those patterns are known as “FX signals”. The technical analysis uncovers current market signals by studying the past FX signals. Traders can predict the FX trend reversal. Technical analysis assumes that price fluctuations have a reason they are not random. When a certain trend gets established it will possibly consist for some time.
For technical analysis, there is a need to learn different indicators, which you can do on the ADSS brokerage platform. Open a free Forex Demo Account and practice technical analysis because it strengthens your emotional control and disciple.