Types of Forex Analysis.. The Forex market is a market that mainly targets cash currencies.. where you can buy, sell and speculate with currencies.. The Forex market is also considered to be one of the largest financial markets of all time , as it contains more than $5 trillion in the daily transactions it witnesses, making it even larger than the futures and bond markets.
Types of Forex Analysis
There are two types of forex analysis, fundamental analysis and technical analysis, which we explain to you below:
Fundamental Analysis:
Fundamental analysis is defined as a method of analyzing financial markets with the aim of predicting prices, trade and gross domestic product… in addition to the impact of these factors relative to the value of the national currency to which they relate.
The basic premise of fundamental analysis of forex and other financial markets is that the price of an asset can differ from its value. As such, some markets often resort to pricing an asset by increasing or decreasing its price in the short term. Fundamentalists also believe that assets will eventually always return to their correct prices, even if they are valued in the short term.
Technical analysis:
Technical analysis is the study of the past performance of the stock price and its trading to know its future direction. This is done by using specialized programs to convert price changes into charts that link price over time. Technical Analysis Analysis is also widely used among traders and speculators. Also, technical analysis is considered an art and not a science.. but the downside of technical analysis is that it depends on expectations and some limit the spread of technical analysis to their attribute easy learnability.
Some of the most popular types of technical analysis include:
Japanese candles.
The general trend.
price action.
support and resistance.
Harmonic Patterns.
Which is better, fundamental or technical analysis?
Neither of them can be dispensed with, technical analysis and fundamental analysis, but they must be combined. To become a pro in the Forex market, you need to know how to use both types of analysis effectively.
Also, it is not possible to rely on just one analysis, be it technical analysis or fundamental analysis. Instead, you should learn to use both and link them together, because this is the only way you can really get the best results from your trading.
Understand forex signal systems
Once analyzed, the trading recommendations result in an action to buy or sell a security or other asset. This analysis can be performed by the trader using technical indicators, or it can be generated using mathematical algorithms based on market activity and other economic indicators.
There are many technical indicators available to traders, including the moving average or the stochastic oscillator. Chart patterns such as head and shoulders, round bottoms, flags and pennants can also be used.
Trading recommendations can be complex; However, traders tend to keep things simple with a small number of inputs. It’s easier to maintain a simple recommendation generator and test it regularly to see which components need to be adjusted or replaced.
Too much input leads to complexity that takes more time, and since markets often change very quickly over time, complex strategies can become outdated before testing is complete.
Developing a trading or investment recommendation approach is a precursor to developing a fully algorithmic or even automated trading system. An example is high frequency trading (HFT). These systems use recommendations generated in milliseconds to trade in and out of different positions hundreds to thousands of times per day.
How to use forex signal systems
Forex signal systems can create trades either manually or automatically. The manual system involves a trader having a computer, looking for signals and interpreting whether to buy or sell.
A trader’s automated trading system involves “teaching” the software what recommendations to look for and how to interpret them. Automated trading is believed to be the psychological elementt eliminated, which hurts many traders.
Recommendations can come from other currency pairs, bond prices, commodity prices and stock prices.
fiscal policy
State governments use a range of spending levels for government spending and revenue from taxes, government debt and revenue surpluses to achieve maximum economic and social balance and to improve
Fiscal policy is divided into two basic types:
1- Expansionary fiscal policy
The government implements these expansionary policies in cases of economic recession, and these policies mainly depend on increasing the liquidity ratio in the country by increasing government spending or cutting taxes to stimulate the economy to return to economic and social balance, and it is referred to as the “facilitation policy”.
2- Contractionary fiscal policy
The government is working to implement deflation policy in the event of an inflation gap. This policy relies on reducing liquidity in the country by cutting government spending, raising taxes, or a combination of both to reduce demand and return to economic and social equilibrium, referred to as “tightening policies”.
