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    Which Type of Analysis for Forex Trading is Best?

    Abstract:Fundamental Analysis (FA) includes poring over financial information reports and news headlines, whereas Technical Analysis (TA) includes poring over charts to identify patterns or trends.

      The question that has been going on for years. The million dollar question.

      Believe me, this journey you that youre taking, you will find plenty of strong advocates for each type of analysis.

      Fundamental Analysis (FA) includes poring over financial information reports and news headlines, whereas Technical Analysis (TA) includes poring over charts to identify patterns or trends.

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      Traders who are a big fan of technical analysis camp scream,

      “Fundamental analysis are useless! FU to FA! As you can see in the charts, they are already priced in!”

      Whilst hardcore traders using fundamental analysis camp scream,

      “Technical analysis are nothing but a bunch of drawings and imaginary lines! Pointless fake voodoomagic! TA is BS”

      In the meantime, those traders in the sentiment analysis camp are...observing those two camps fighting and paying attention to their level of sentiments towards each other!

      Fortunately, these 3 types of market analysis complete one another.

      Even the biggest fan of technical traders will observe bits of fundamental views in order to help with the technical analysis. Same goes to other strategies.

      In the real market, prices are constantly changing and are constantly develop trends. These price changes can and do affect fundamentals.

      This implies that trends in prices influence fundamentals similarly as fundamental influence prices.

      And finding trends is a big part of technical analysis, as we will learn in later lessons.

      Try not to be tricked by these uneven fanatics! One isn't better compared to the next… it's just a different way of looking at the market.

      Ultimately, you should execute a trade in view of the sort of analysis you are generally agreeable and beneficial with.

      Remember that technical analysis is the study of the movement of the price of a currency on a chart and fundamental analysis examines the state of the country's economy.

      Market sentiment analysis decides if the market is bullish or bearish on the current or future fundamental standpoint.

      Fundamentals shape sentiment, while technical analysis assists us with imagining that sentiment and apply a structure to execute our trade plans.

      These three work together to give you great trading ideas in the Forex market. All historical price movements and economic indicators – all you have to do now is start that brain of yours and put your analytical skills to a test!

      To emphasize the importance of all three types of analysis, I will present this three-legged chair again.

      If you remove one or two legs of the stool, it will shake, right?!

    WikiFX,

      To become a true forex trader, you need to know how to combine those 3 market analysis in order for you to fully utilize your trades.

      Dont believe us?

      Here's an example of how disastrous it can be to focus on just one type of analysis.

      • Suppose that you're checking out your charts and you managed to find a solid trading opportunity.

      • You get all energized pondering the cash that will be pouring down from the sky.

      • You tell yourself this. “Nothing could go wrong with this opportunity I found in GBP/USD. Absolutely loving my charts. Mwah”.

      • Then you went on to buy GBP/USD with a bright smile.

      • You pulled out your phone, took a selfie, and post that bright smile of your in Instagram.

      • Then after that, you do a happy dance and post in TikTok.

      • Hold up, wait a minute! Something aint right! Suddenly the trade moves 100 pips in the other direction!

      • Much to your dismay, however the UK just gave a FU to the EU.

      • Since your main strategy is just to rely on charts, you do not know WTF an EU is. So you Google it.

      • You discover that it represents the European Union, which is a monetary and political association including 28 European nations, that permits streamlined commerce, and that implies products can move between part nations with no checks or additional charges.

      • Oh my gosh! Now youve realize that if Britain wants to do this, it is probably serious. Their economy could be destroyed. A lot of people will lose their jobs.

      • Out of nowhere, everybody's sentiment towards Britain's market goes bad, and everybody trades the other way!

      •Your huge smile flips around and you begin becoming furious at your charts.

      •You toss your PC on the ground and start to crush it. (You snap a picture of it and tweet it out.)

      • You just lost a lot of money, and presently your PC is broken into a billion pieces. (Be that as it may, your tweet presently has 1,000,000 likes.)

      • It's all because you totally disregarded fundamental analysis and sentiment analysis.

      (Note: This was not a real story. It didn‘t happen to us because we aren’t that naive. We have always been a smart forex traders... Judging by exaggerated satire, you will understand.)

      Okay. The story has been tweaked a bit, but you get the whole picture.

      Did you remember the word of advice from your mom that too much of something is never good?

      Well, you might no believe her and thought it was nonsense, but in forex, the same thing applies when deciding which or what analysis youre going to use.

      Try not to depend only on one strategy.

      Instead, you must learn how to effectively combine all three. Only then youll get the most out of your trading.

      Where do we go from here?

      Now that youve completed kindergarten and learned bits of each type of analysis, it is time for you to dig even further.

      Here's something for you over the next few years...

      Were joking! We are talking about the next academic year of the WikiFX School.

      Elementary school is the novice's manual for technical analysis.

      You will learn all about price action dynamics such as MACD, technical indicators, Japanese candlesticks, suppor and resistance levels, and moving averages.

      You will learn how to experiment with leading and lagging indicators and youll learn how to use them in your upcoming trading ideas.

      Seems pretty interesting, right?

      The rest of the Middle School and High School years are commited to concentrating on more technical analysis tools.

      We will look at advanced forex tools such as Heikin Ashi, harmonic patterns, pivot points, Elliot Wave Theory, and pivot points.

      Sounds fancy, doesn‘t it? Well that’s because they are! We know youre excited to get started on those!

      It will be more complicated once you enter college because you will need to learn how to tackle both fundamental and sentiment analysis at the same time.

    WikiFX,

      Talk about hitting two birds with one stone!

      You're the stone and the birds are… all things considered, you get the point.

      A few justifications for why we're combining fundamental and market sentiment analysis together:

      • By the time you enter college, you will be so engrossed in learning foreign exchange that one class will not be enough.

      • It is difficult to define the boundary between fundamental and market sentiment analysis, yet you'll arrive there with consistent practice.

      Weve mentioned this earlier, fundamental views are commonly liable for shaping marketplace sentiment.

      Those kinds of evaluation could soak up each freshman and sophomore years of college.

    Next Lesson
    3 Different Types of Forex Charts and How to Interpret Them

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    • United Arab Emirates Dirham
    • Australia Dollar
    • Canadian Dollar
    • Swiss Franc
    • Chinese Yuan
    • Danish Krone
    • Euro
    • British Pound
    • Hong Kong Dollar
    • Hungarian Forint
    • Japanese Yen
    • South Korean Won
    • Mexican Peso
    • Malaysian Ringgit
    • Norwegian Krone
    • New Zealand Dollar
    • Polish Zloty
    • Russian Ruble
    • Saudi Arabian Riyal
    • Swedish Krona
    • Singapore Dollar
    • Thai Baht
    • Turkish Lira
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