Analysis of Foreign Exchange market is essential to the buyer as it reduces the probability of making losses and during Foreign exchange. There are two types of Forex analysis, i.e., fundamental analysis and technical analysis. It is used by the retail day forex day trader in order to determine whether to buy or sell a currency pair at any time. Forex analysis could be technical in nature, using charting tools or fundamental in nature using economic indicators. Analysis using the day trader’s currency trading system creates buy or sell decisions when they point in the same direction. The forex trading strategies that use this trading latest analysis could be free, created by the trader or can also be found at a certain amount of fee.
Fundamental analysis is used to analyze changes in the forex market by monitoring factors that may affect the forex exchange e.g. interest rates, unemployment rates, GDP and other economic factors based on the country. For example, a trader interested in EUR/USD currency pair fundamentally would be interested in the interest rates in the Eurozone compared to those in the U.S wanting to be also to be on top of any significant news releases coming out from each country in terms of economies.
Technical analysis is a system that uses past price movement to know if a currency may be headed. It could be manual or automatic where the manual system involves a trader analyzing technical indicators and determining whether to buy or sell. The automated system comprises trader teaching the software that signals to look for and how to interpret them. Both of the analysis systems can be purchased over the internet. There is no best method used by the trader. It depends on the buyer’s time frame and access to information that could be the most viable option. A short term trader with delayed information to economic data but access to quotes would use technical analysis. On the other hand, longer term trader or trader with access to latest news, reports, and economic data would use fundamental analysis.
With this information and analysis strategies, a trader is able to know the best strategy to use or go for.