How To Apply Analytics For Profitable Forex Trading
One thing traders need to know before jumping into the forex market: there are many participants in the forex market. Starting from the government, central banks, commercial banks, hedge funds, multinational companies, and small forex traders. Their behavior and point of view will all affect currency rates in the forex market. Traders themselves may not be able to move the exchange rate in the direction the trader wants, no matter how much capital they have.
So, how to profit from the forex market? traders must analyze market conditions and current currency rates, then predict the direction of the next exchange rate movement. The most successful traders don't just rely on one analytical technique. They study fundamental and technical analysis, then combine it in three simple steps.
Use Fundamental Analysis To Know Long-Term Trends
The analysis mainly needs to focus on GDP, interest rates and inflation rates. For example, if the US central bank (Federal Reserve) begins to raise interest rates, the US dollar will be stronger in the future than other currencies. Look for which currency has the largest interest rate differential with the USD, as the long-term trend of the USD is likely to be the most bullish against that currency.
Use Technical Analysis To Determine Buy or Sell Points
Just predicting future trends is not enough. Traders also need to know the right buy/sell points. Use indicators such as the Moving Average, MACD, or the Relative Strength Index (RSI) to find precise buy/sell signals at a given exchange rate.
Make Weekly Market Review
If traders analyze the market only on a daily basis, then traders will often be disturbed by unnecessary noise. For example, EUR/USD tends to be bullish, but weakened first because it was disturbed by rumors which later proved to be untrue. Therefore, it's a good idea for traders to compile weekly market reviews every weekend (when the forex market is closed).
Weekly reviews will help traders find a broader analytical picture, as well as plan trading for the week ahead. In this weekly review, note things like:
- The fundamental events that moved the market last week and which will have an impact until next week?
- What fundamental events will happen next week? Are there certain times that you need to avoid so as not to be exposed to unexpected fluctuations?
- How about technical analysis on the daily timeframe chart (Daily)? Does it tend to be bullish or bearish?
Even if you choose to trade daily or only focus on technicals, a weekly review like this will be very useful for getting a more accurate analysis.
Comments
Post a Comment