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Fundamental analysis is a way of looking at the forex market by analyzing economic, social, and political forces that may affect the supply and demand of an asset. If you think about it, this makes a whole lot of sense! Just like in your Economics 101 class, it is supply and demand that determines price, or in our case, the currency exchange rate.
Using supply and demand as an indicator of where price could be headed is easy. The hard part is analyzing all of the factors that affect supply and demand
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In other words, you have to look at different factors to determine whose economy is rockin’ like a Taylor Swift song, and whose economy sucks. You have to understand the reasons of why and how certain events like an increase in the unemployment rate affects a country’s economy and monetary policy which ultimately, affects the level of demand for its currency.
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The idea behind this type of analysis is that if a country’s current or future economic outlook is good, their currency should strengthen. The better shape a country’s economy is, the more foreign businesses and investors will invest in that country. This results in the need to purchase that country’s currency to obtain those assets.
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Higher interest rates make dollar-denominated financial assets more attractive. In order to get their hands on these lovely assets, traders and investors have to buy some greenbacks first. As a result, the value of the dollar will likely increase.
Later on in the course, you will learn which economic data points tends to drive currency prices, and why they do so. You will know who the Fed Chairman is and how retail sales data reflects the economy. You’ll be spitting out interest rates like baseball statistics.
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Kidding aside, the market basically represents what all traders – you, Pipcrawler, or Celine from the donut shop – feel about the market. Each trader’s thoughts and opinions, which are expressed through whatever position they take, helps form the overall sentiment of the market regardless of what information is out there.
The problem is that as retail traders, no matter how strongly you feel about a certain trade, you can’t move the forex markets in your favor. Even if you truly believe that the dollar is going to go up, but everyone else is bearish on it, there’s nothing much you can do about it
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As a trader, you have to take all this into consideration. You need to perform sentiment analysis. It’s up to you to gauge how the market is feeling, whether it is bullish or bearish, and you decide how you want to incorporate your perception of market sentiment into your trading strategy. If you choose to simply ignore market sentiment, that’s your choice. But hey, we’re telling you now, it’s your loss!
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Throughout your journey as an aspiring forex trader you will find strong advocates for each type of analysis. Do not be fooled by these one-sided extremists! One is not better than the other…they are all just different ways to look at the market.
At the end of the day, you should trade based on the type of forex analysis you are most comfortable and profitable with
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Fundamental factors shape sentiment, while technical analysis helps us visualize that sentiment and apply a framework to create our trade plans.
Those three work hand-in-hand-in-hand to help you come up with good forex trade ideas. All the historical price action and economic figures are there – all you have to do is put on your thinking cap and put those analytical skills to the test!
Let me pull out that three-legged stool again just to emphasize the importance of all three types of analysis.
Take out one or two legs of the stool and it’s going to be shaky, right?!
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Sir forex trading aik good business hay es main kamyabi kay liay bohat zaida time and money ki zaroorat hoti hay. jetna zaida time deya jay ga us say good experience hasal ho ga and good earning kay liay good investment ki zaroorat hoti hay. agar business main hum investment nahi karin gay to hum business ko run nahi kar saktay. es liay investment karna zaroori hay.
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In order to become a true forex master you will need to know how to effectively use these three types of forex market analysis.
Don’t believe us?
Let us give you an example of how focusing on only one type of analysis can turn into a disaster.
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Let’s say that you’re looking at your charts and you find a good trading opportunity.You get all excited thinking about the money that’s going to be raining down from the sky.You say to yourself, “Man, I’ve never seen a more perfect trading opportunity in GBP/USD. I love my charts. Mwah. Now show me the money!”
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You then proceed to buy GBP/USD with a big fat smile on your face (the kind where all your teeth are showing).
But wait! All of a sudden the trade makes a 100 pip move in the OTHER DIRECTION! Little did you know, one of the major banks in London filed for bankruptcy! Suddenly, everyone’s sentiment towards Britain’s market turns sour and everyone trades in the opposite direction
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Your big fat smile turns into mush and you start getting angry at your charts. You throw your computer on the ground and begin to pulverize it. You just lost a bunch of money, and now your computer is broken into a billion pieces.And it’s all because you completely ignored fundamental analysis and sentimental analysis.
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Ok, ok, so the story was a little over-dramatized, but you get the point.
Remember how your mother used to tell you as a kid that too much of anything is never good?
Well you might’ve thought that was just hogwash back then but in forex, the same applies when deciding which type of analysis to use.
Don’t rely on just one.
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Now that you’re done with Kindergarten and learned a little bit about each type of analysis, it’s time to delve much deeper! Here’s what’s in store for the next few years of your life…
We’re kidding, we’re kidding! We’re talking about the next few school years in the School of Pipsology.
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You are quite right. You can't just rely on your investment or money as some people feel that they can make money by investing a huge amount of money and that they will get profit over it but the fact is that they lose just because they don't learn forex. Learning forex takes time but it gives your profit so both of them are needed.
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han g bilkul forex ma money be deney partey ha or time be dena parta ha agar kuch hasil karna ha tu tab hi kahi kuch ja ka milta ha bohat zaida mehnat karna partey ha is kam ma is ko samjana parta ha sahi se
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forex ke trading ek esa online business hai ke yeh ap se ap ka time bhe mangta hai or ap ke investment bhe mangta hai forex ke trading main hume dono he invest krna hote hai forex ke trading main agar achi investment krte hain or time nh dete hain ya time dete hain or invest achi nh tu success nh kr sakte hain
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Haan bhai dono cheeze yaha par humare ko spend karna hota hai bhai, time pahle invest karna hoga kyunki learn karne ki jayda jarurat yaha par padegi bhai, agar time diya gaya hai to jarur hum trading mein acha paisa daal kar trading se kama lenge bhai.
