There are so many questions that appear when you start to analyze currencies. Many do not even properly understand what this actually is. We end up looking at terms that we never heard about and do not really know what to do.

The problem is that currency market analysis is paramount to the success of any currency based investment. You simply cannot focus on currencies and make a profit in the event that you do not know exactly what the market is like, how it operates and what will happen in the future. Most people do not have the luxury of using automated systems or do not want to. You can see this platform as an example of an automated signal based trading system. This is an option but since you are here, you surely want to do your own analysis.

We basically have these two main things that have to be taken into account.

Fundamental Currency Analysis

We have numerous macroeconomic factors affecting currency value and exchange rates. The fundamental currency analysis analyzes such factors in order to determine the country’s well-being in terms of economy. Economic standings are strongly connected with the currency value. Examples of factors that would be considered in such an analysis will include:

Trade balances
Interest rates
GDP
Inflation rates
Job Growth

The main goal in this situation is to gauge overall economic factors, those that will affect country currency. As a simple example, in the event that a country has increased inflation rate, currency value is going to be decreased. Forex traders and market investors have to think about when they enter trading positions as they bet on downward trends associated with the currency.

Remember that trading when only thinking about fundamental currency analysis is quite difficult. In most situations the experienced traders also use technical analysis.

Technical Currency Analysis

Nowadays, we have access to so much exchange market financial data and the day traders often use this information. Through technical analysis we understand the process of basically digging into the market data in order to reveal some price patterns and market behaviors. Such an analysis is normally going to be carried out over a really long period of time, normally over one year. However, it is also common to run short analysis for around 4 hours.

Trading software is nowadays really important for the traders. It is used as a way to improve insights used in technical analysis. Trading applications that are modern are now designed with the use of advanced algorithms, meaning that price patterns and evolution behaviors are automatically analyzed, making everything really easy to analyze. The main advantage that is associated with technical currency analysis is that a day trader will have access to much better knowledge related to when to exit and when to enter specific positions.

What Should You Use?

Obviously, the best thing that you can do is to use both types of currency analysis. However, the day traders are normally going to respect this rule more than the long term traders. As always, the more information that is gained about the current state of the market, the higher the possibility that a good trade will be done!

By Boris Dzhingarov

© 2016 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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