Education


How to analyze markets from RoboForex

There are
conventional methods of analyzing the market situation. We will discuss 2 of
the most popular of them – fundamental and technical analyses. Each method has its
drawbacks and advantages. Keeping in mind the huge number of market players, we
will not dare say that one method is right and the other is wrong – we will
just discuss some examples.

Fundamental
analysis

Fundamental
analysis
is based on fundamental data that includes all kinds
of news: economic, political, and urgent. The main group of the news can be
found in the economic calendar. It is quite simple to use: it reflects all the
key news, the time of their publication, preliminary forecasts and expectations,
and after the data is published officially, its factual meaning also reflects
in the calendar. Based on the preliminary statistics, analysis can be carried
out and a forecast made about the behavior of the trading instrument after the
publication of certain news.

The main
economic news is:

  • Interest rates of Central banks
  • GDP
    data
  • Speeches of the heads of Central banks
  • The unemployment rate in the USA
  • Non-Farm
    Payrolls
    – one of the most important pieces of news published
    on the first Friday of each month. This index can influence the movements of
    currency pairs dramatically. Unofficially, the day of the publication of this
    news is called the “trader’s salary date”.

Apart from
the above, other pieces of news have little significance alone but taken
together, can influence the market seriously.

Political
news includes:

  • Presidential elections
  • Parliamentary elections
  • Coups and revolutions
  • Changes in the government
  • Force majeure events
  • Natural disasters
  • Technical disasters
  • Wars, terrorist acts, and strikes

In trading,
fundamental analysis is used for forecasting mid-term and long-term market
movements, based on the news among other things. For making money quickly,
traders use the moment of the publication of a piece of news. At such moments,
the market can demonstrate steep growth or decline of the quotations of trading
instruments, which may become a good source of income.

Fundamental
analysis can be good for beginners as well. Even without a good understanding
of certain indicators and their influence on the market, the trader can if not
make money then save it. Before the publication of serious news, for beginners,
it is enough to abstain from opening new positions and protect the existing
orders.

Technical
analysis

Technical
analysis
includes all types of chart analysis, studying resistance
and support levels
, as well as the values of various indicators.
The name “Tech analysis” itself implies using technology for making
forecasts. The technology includes various indicators, that are more than
abundant and are constantly modernized and modified.

For
example: 

  • Moving Averages
  • Stochastic Oscillator
  • Ichimoku
  • Parabolic Sar etc.

Technical
support and resistance levels

They can
also be drawn in various ways, such as:

  • Pivot levels
  • Fibonacci
  • Gann lines
  • Classic support and resistance lines
  • Chart analysis patterns, etc.

With
fundamental analysis, everything is more or less clear. Certain events have a
certain influence on the market. In technical, there are plenty of options and
strategies. For example, analyzing the trading instrument with several
indicators, we can get contrasting results. This does not mean that tech
analysis is better or worse than the fundamental one – this is just another way
of analyzing the market. Currently, a trader may not only choose a type of tech
analysis but also customize it.

Setting up
indicators

As a rule,
each indicator has default settings used by most traders. Such settings are not
always efficient enough on major currency pairs and high-volatility
cross-rates. Experimenting with the settings and entry parameters based on
personal experience, one can adapt them effectively to the chosen trading
instrument.

Tech
analysis

In tech
analysis (which is also called graphic), there are also variations of drawing
support and resistance levels, as well as patterns of tech analysis. On the
chart, the trader can draw the lines and define the patterns themselves, based
on which they will make the trading decisions later. Tech analysis lies at the
basis of many trading systems and strategies. Tech analysis is a complex idea
aimed at confident forecasting the price movements. It is not impossible that
in the nearest future new methods and ways of market investigation will be
invented in accordance with the requirements of modern traders.

Bottom line

Traders
have a great choice of options for evaluating the market situation. What is
more, they can always combine different types of analysis as well as customize
them in accordance with their needs and preferences. The main thing is not to
forget that any trading strategy and analysis method requires a systematic
approach to studying and applying it.

This article was submitted by Dmitriy Gurkovskiy, Financial Expert and
Author at 
RoboForex Blog

Roboforex



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