Types of analyses, which are the best?

Types of analyses, which are the best?

Types of analyses, which are the best?
John Dou - 21/02/2020

Sharefounders

This review of Sharefounders Forex will cover the types of analyses, as well as their features.

A Forex trader needs to know two types of analysis: technical and fundamental. In order to succeed in Forex trading, it is vital to know both types.

What is technical analysis?

Technical analysis is the study of historical price movements in order to predict future movements. This is a very effective method of analysis.

In financial markets, price movements are constantly repeated. This is due to the fact that the price is driven by people, and people are rigidly tied to certain templates.

Technical analysis is the most common way to trade on the Forex market. It is also a kind of self-fulfilling prophecy.

If hundreds of thousands of traders look at the same analysis data, they will trade the same way. The fact that everyone trades the same way will push the price in the right direction.

Sharefounders Forex provides an example: the price of USD / CAD turned around at 1.0625 twice in a row. The next time the price reaches 1.0625, thousands of traders will get short because they are expecting a reversal.

You should know that technical analysis is not as simple as it may seem. If you make a mistake in your analysis, you can take a short position when most traders take a long one.

What is the fundamental analysis?

When conducting fundamental analysis to justify their trading decisions, traders look at the country's economic indicators.

Economic news can often have a big impact on the price. You can track economic news using a special Forex calendar.

Sharefounders Forex emphasizes that fundamental analysis uses economic data to predict currency movements. By interpreting economic data, you can assess the strength of a country's economy.

For example, if Europe's economy is doing better than the US economy, a fundamental trader can go long. This is due to the fact that the trader expects the Euro to rise against the dollar.

As a rule, fundamental traders hold trades for weeks or even months. Economic factors usually do not cause rapid jumps in the value of a currency. An excellent example of all this is interest rates.

One of the most important economic indicators for fundamental analysis is interest rates.

Countries with high-interest rates attract more foreign investment. If you had to choose between an interest rate of 0.5% and 5%, you would naturally choose 5%.

In the long run, high-interest rates increase the value of a currency as people invest in that country's economy.

What is better, technical or fundamental analysis

Now you know all about these two types of Forex analysis, and which one do you think is better?

Sharefounders Forex assures — neither one nor the other!

Both technical and fundamental analysis have their own strengths and weaknesses.

Ignoring fundamental analysis often leads to the trader falling into a trap during news events.

Ignoring technical analysis can make you vulnerable to price movements at key levels. You need to find a balance between these two types of Forex analysis.

 

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