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  • by Sophie Robinson
  • Mar 23, 2023
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How to analyze the market?

The success of making a trade and then making a profit depends directly on the careful handling of vast amounts of information.

How to analyze the market?

A trader needs to understand the current market situation, because only on this condition can a trader correctly predict the future movement of the value of selected assets.

Regardless of trading strategy (short-term or long-term) the decision to open a position should be conscious and require serious analytical training.



When choosing a method of analysis, traders consider the type of market, trading strategy used, duration of a deal, and time intervals. Analysis based on reliable and up-to-date information helps to make timely corrections to an investment portfolio, and the decision to quit or enter the market. Traders in different types of markets (stock, futures, currency) use technical and/or fundamental analysis, whereby: 

Fundamental analysis is used by investors when choosing a long-term strategy; 

Technical analysis is mainly used by traders for short-term trading.


At the same time, short-term traders must take into consideration fundamental factors such as economic statistics, the condition of a particular sector of the economy, the general mood of a particular market, and other fundamental factors. Long-term traders use technical analysis to determine as precisely as a possible entry point. An exception to the general rule is scalpers who trade on the chart.



For private traders Forex is the most popular because:

 the foreign exchange market is available to traders with a small starting capital;

It is easy to register a client account with a Forex broker;

There is a huge number of brokers on the market, which provides the opportunity to choose.

Most Forex traders use technical analysis to analyze the market. Its vast tool kit enables you to easily select the tools to suit your strategy. The main and most commonly used tool for technical analysis is a price chart, which reflects the instrument's history. Knowledge of the history of a certain instrument allows the trader to make correct assumptions regarding the movement of the price of the selected asset.

Experienced traders prefer to have their own sets of trading instruments. By studying the behaviour of the instruments, the ranges of average and maximum movements, and correlations with other markets, traders learn to understand the reactions of the instruments for more effective application. In most cases, the tools are major currency pairs, but some traders prefer to work with exotic currencies or cross pairs.



Which type of analysis is better for Forex?

Traders who have entered the Forex market for a long and serious time are recommended to master both types of market analysis. Mastery of both techniques allows you to get the most accurate information, hence, to act without errors. The best option is to use both technical and fundamental analysis tools together because the fundamental analysis will help you to know how a trend or pair will behave in the future, while technical analysis will help you to make correct predictions.