The forex market or “foreign exchange market” is the largest financial market in the world, with an average daily turnover of more than $1.5 trillion in capital, which is more than 30 times the sum of all securities transactions in the United States, unlike financial markets.
On the other hand, the foreign exchange market does not have a specific location or a central exchange, but trades through an electronic network of banks, companies and individuals. Analyzing forex market trends can help us make trades and understand the market well.
In today’s article, let’s learn about the relevant knowledge of forex trend analysis in the hope of helping everyone’s investment.
Identifying Trends in Forex
Fundamental analysis or technical analysis can be used and both can achieve the desired purpose, or can Use a combination of the two methods. They are both explained below.
1. Fundamental Analysis Method
Fundamental analysis is more suitable for predicting long-term exchange rate fluctuations. Fundamental analysis is used when trading in the forex market to predict the long-term direction of exchange rates. Fundamental analysts believe that currency strength reflects the economic situation of a country, although its strength may be affected by other non-economic factors and maybe There are temporary fluctuations due to market intervention or an adverse trend of the economic system, in the long run the price of the currency will eventually return to the point where it matches the economic situation.
As for how to measure the good or bad economic situation, a relative comparative method should be adopted, for example: the economic growth rate of the United States in 1996 is estimated at about 3%, in the eyes of fundamental analysts, this data cannot judge whether the dollar will strengthen or weaken, But it must be compared with the economic growth rate of the previous year and also compared with the economic growth rate of major countries such as Germany and Japan.
Data that reflects an economic condition, i.e., the so-called economic indicators affect currency movements, there are many of them: such as trade deficit, money supply, central bank policies, consumer price index, producer price index, unemployment rate, etc., the basic trader must collect and analyze various data and conduct Further analysis and comparison between them as a basis for judging the future direction of each currency.
2. Technical Analysis Method
Technical analysis methods play an important role in predicting short-term or very short-term forex trends. There are many technical indicators in forex technical analysis such as RSI, MACD, moving average, Bollinger Bands, etc. Traders can use these technical indicators to analyze Future forex trends and prediction.
Methods of using technical analysis requires special attention to discipline, each step in each response plan is part of the overall deployment strategy and should not be changed immediately, all adjustments should be planned in advance and implemented when necessary.
Before the market opens each day, traders should study the short-term exchange rate trends and evaluate the impact of changes in the market at night on the foreign exchange market in the morning. The market trend on the daily chart shows the main trends that you should pay attention to when entering the market.
Closing Thoughts
Maybe you prefer to use technical analysis instead of fundamental analysis, but if you don’t know the effect of common fundamentals on the trading market, it will be harmful to the general trading, because the trend of trading is full of uncertainties and sometimes it may lose due to a small mistake, so everyone should be careful, patient and calm when judging on trend.
