Forex trading has been gaining popularity around the world. This is because of its key benefits, such as the ability to generate substantial returns quickly along with the ease of investing. However, if you really want to maximize your long-term wealth, it is advisable that you develop investment strategies based on your analysis of the markets.
Forex traders can make use of several tools that could help them in making smarter investment decisions. All reputed forex brokers out there in the market provide advanced market analysis tools like news, economic calendars, and charting.
This article discusses these tools and helps you in making the most of them in order to boost your trading.
How To Use Market Analysis
Figure 1: Market Analysis Phases
Source: India Infoline
The most important thing to remember for traders is to focus on a macro perspective rather than a micro one. Such a broader view could help you in understanding the true reasons behind the movement of currencies.
Market analysis can be conducted in various forms, including fundamental analysis, technical analysis, sentimental analysis, and expert analysis. Each of these has its own benefits and limitations. It would help if you opted for a technique that is most suited to your way of trading.
The Importance Of An Economic Calendar
As a forex trader, it is extremely important for you to remain updated about the latest happenings in the market. This includes economic announcements, policy decisions, as well as potential agreements between nations.
The best way to keep an eye on all these developments in a single place is to make use of an economic calendar. It is a well-known fact that fiscal and monetary policies of central banks around the world have a direct impact on financial markets.
Therefore, forex traders must keep an eye out for all important decisions made by governments, key leaders, and policymakers. Economic calendars make sure that you can keep track of all such important events.
In addition to the above, economic calendars also cover several other aspects of the global economy. Some of these aspects include changes in employment/unemployment rates, average weekly hours, exports and imports, the balance of trade, housing statistics, consumer confidence indices, consumer credit change, core inflation, as well as the consumer price index.
Focusing On Important Market News
Foreign exchange brokers allow you to access the most important market news and then make your investment decisions based on a thorough analysis of the developments. These brokers make sure that you do not have to search through multiple news sources in order to get the latest updates. You just need to visit their website and all relevant information is there at your disposal.
Some of the top brokers also allow you to access video feeds in addition to the text news. These videos can prove to be invaluable for forex traders because they provide an additional visual element to them. Further, some videos also offer a detailed analysis of the news rather than just reporting the announcements. Such features can really help forex traders in getting their investment decisions right.
Despite the above resources being available, many traders still choose to conduct their own research. This is because they believe that they should review all aspects of an announcement before putting their money on the line. This is not a bad strategy at all.
In fact, certain top brokers also allow you to conduct your own research and analysis before choosing to invest in a particular currency pair. This way, traders can ensure that they are not losing money due to a hasty decision.
Analyzing Charts & Graphs
Numerous brokers allow traders to use charts and graphs while trading on their platforms. These charts and graphs can comprise both fundamental as well as technical analysis.
While fundamental analysis focuses on the intrinsic value of a particular share, technical analysis is more inclined towards the identification of trends and patterns. Similarly, fundamental analysis focuses on both quantitative and qualitative factors, while technical analysis is more inclined towards reading price movements.
It is extremely difficult to say which type of analysis works better for forex traders. While certain traders prefer fundamental analysis because it enables them to take a broader view, others pinpoint the fact that technical patterns can be indicative of future price movements in a more accurate manner. Nevertheless, both these forms of market analysis can act as major boosters for forex traders.
Once you are familiar with the analysis techniques, you are better-equipped for forex trading. These techniques can not only improve your chances of making money but also help you in building your knowledge about the wider economy and understand the potential implications of decisions.
This way, you can become a smarter investor and improve your wealth at the same time.