It's hard to predict the forex markets, but it's what many of foreign exchanges traders and brokers do every day, with varying degrees of success. Like forecasting the weather, predicting the currency market is sometimes a crapshoot, sometimes a guessing game, and always an adventure.
There are two basic philosophies on how to forecast the forex markets. One is technical analysis; the other is fundamental analysis. We'll look at them both.
The technical methods examines past market trends and uses that data to forecast the future. Previous trends in most areas of life are almost always good signals of the future; currency is no different. People have not changed much in the decades since the foreign exchanges market was created. People still buy and sell and react to stimuli in much the same way as they did 50 years ago.
Since forex rates change constantly throughout the day, every day, looking at all the years of past data can be daunting. Smart analysts tried to look at the general picture, to skip the minor details and evaluate trends over a longer period of time.
Using fundamental method to forecast foreign exchanges markets is a bit more complicated, but it can also be highly accurate. Basically, fundamental approach means forecasting the market based on external factors -- political moves, government involvement, social movements, even the weather. Analyst good at fundamental analysis might forecast foreign exchanges drop-offs because he knows a country's government is unstable at the moment, or increases because the country has just appointed a highly-acceptable new leader. Anything that can influence a nation's economy can affect the exchange rates, and that's what a fundamental analyst uses to guess at the foreign exchanges market's future
Naturally, this means having to know a particular region in-depth, which is hard to do for more than a few nations at a time. (It becomes even more complicated when trying to predict the euro, since several different countries use that currency.) But having that kind of intricate knowledge makes it much, much easier to forecast currency future.
Most good analysts use a combination of both methods, technical and fundamental. For instance, a broker might see that a region is currently facing a particularly strong hurricane season (fundamental) and know that in the past, strong hurricane seasons have meant a weaker economy for that country (technical). Thus, he can predict down-turns for that nation with some degree of accuracy.
For more articles, audios and tools on forex trading, please visit Forex Cyber Trading
There are two basic philosophies on how to forecast the forex markets. One is technical analysis; the other is fundamental analysis. We'll look at them both.
The technical methods examines past market trends and uses that data to forecast the future. Previous trends in most areas of life are almost always good signals of the future; currency is no different. People have not changed much in the decades since the foreign exchanges market was created. People still buy and sell and react to stimuli in much the same way as they did 50 years ago.
Since forex rates change constantly throughout the day, every day, looking at all the years of past data can be daunting. Smart analysts tried to look at the general picture, to skip the minor details and evaluate trends over a longer period of time.
Using fundamental method to forecast foreign exchanges markets is a bit more complicated, but it can also be highly accurate. Basically, fundamental approach means forecasting the market based on external factors -- political moves, government involvement, social movements, even the weather. Analyst good at fundamental analysis might forecast foreign exchanges drop-offs because he knows a country's government is unstable at the moment, or increases because the country has just appointed a highly-acceptable new leader. Anything that can influence a nation's economy can affect the exchange rates, and that's what a fundamental analyst uses to guess at the foreign exchanges market's future
Naturally, this means having to know a particular region in-depth, which is hard to do for more than a few nations at a time. (It becomes even more complicated when trying to predict the euro, since several different countries use that currency.) But having that kind of intricate knowledge makes it much, much easier to forecast currency future.
Most good analysts use a combination of both methods, technical and fundamental. For instance, a broker might see that a region is currently facing a particularly strong hurricane season (fundamental) and know that in the past, strong hurricane seasons have meant a weaker economy for that country (technical). Thus, he can predict down-turns for that nation with some degree of accuracy.
For more articles, audios and tools on forex trading, please visit Forex Cyber Trading
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