Three Types of Analysis There are lots of ways of analysis in trading world, Technical analysis, Fundamental analysis and sentiment analysis. Technical analysis does through charting and considering “price levels” only. Technician or chartists are interested in price movements only not in companies finance relevant information. Fundamental analysis involves analyzing all information and “value” of a company. For example, company management, working capital, growth story, future scope etc. Sentiment analysis involves generally analyzing sentiment of market trend. Which one is you are going to follow? Confused?? So here we are providing you detailed information of different three main type of Analysis. Learn it and then follow any or all of them. Below Topics Are Covered In Three Types of Analysis: Main Three Type of Analysis There are 3 basic types of analysis mostly followed all over: Technical Analysis, Fundamental Analysis, and Market Sentiment Analysis. Choose the best suits your trading style? Better if you follow most of them. Technical Analysis Technical analysis is the main method which traders follow for study price movement and analyze the trend. Fundamental Analysis Fundamental analysis mostly follows basic components affects market. Social, Economic, and Political factors that affect supply and demand. Sentiment Analysis Yes sentiment works, What are sentiments of market and traders as well? How you feel..? How do you figure out and trade off of that? Which Type of Analysis is Best? To become a master trader of Forex you need to know how to effectively use all above types of analysis. Main Three Type of Analysis Welcome to the learning centre. Please be patient and complete all the sessions peacefully. Without JUMPING. You've learned some history about the Forex. What is it and how it works bla.. bla.. bla…. Just remember, your learning will never stop. One should constantly get update as much knowledge as you can, so you can become a true FOREX MASTER! Learning never ends! Three Types of Market Analysis Here are main three types of analysis. Learning it you will be able analyze market and develop ideas to trade the market. 1. Technical Analysis 2. Fundamental Analysis 3. Sentiment Analysis It’s always tuff to debate which is better, but the fact is, you need to know all of them. It will helpful you to find trading opportunity all the time. If one not works, another will work. Or both will work well together giving you super trade opportunity. Technical Analysis Technical analysis is used to study price movement, analyze trend of market though charting of price level of market or securities. Technical analysis is just simple like seeing up and down arrow and decide trend up or down but only after you reach at an expert level. Main theory is that traders look at historical price movements and bat on upcoming market situation and possibilities of price movement. The most favorable point why technical analysis used mostly is that, theoretically, all the present market information is reflected in price. To make a trade decision, all you need is price information only. You may know that "History tends to repeat itself"? Whatever is predicted is only on the basis of study of historical movements only. So technical analysis is all about analyzing history and predicts future price movement possibility! If a price level held around any major support or resistance in the past, traders will watch for that levels and trades around that historical price level. Technical analysts searches price movement in history and compares with current. If found similar patterns that have formed in past will form trade ideas believing that market will react the way it did before in history. In the world of trading, when technical analysis is to be followed, the first thing required is a chart. Charts are only easiest way to represent historical data graphically! Just have look at previous data and compare with current on can find you some great trading opportunity. As certain price levels and chart patterns followed by traders more and more, the will become major levels to be watch out by analyst in the markets. Technical analysis are very useful but it doesn't mean that they will work with 100 percent surety and tell you that where price will be headed. The main thing is that you can understand the technical analysis well and use it for you to make entry and exit in market. Now you may have understood the philosophy behind technical analysis. You will be familiar with most of technical analysis methods like Fibonacci, Bollinger bands, or pivot points. The only major problem of technical analysis is that only price movement is considered, not fundamental factors. Fundamental Analysis First of all, let me tell you, a technical analyst approaches to trading ideas through the charts, while a fundamental analyst starts with financial statements and continues with many different sources. Fundamental analysis is also one of very important way of analyzes market and securities. Fundamental analyst looks at the economic, social, and political factors that affect market. Analyze economies by using supply and demand indicators and determine where price of commodities or securities may move in future. Analyzing all the factors that affect supply and demand is not so easy. Analyze companies’ data and prepare growth story and future price prospects by reviewing financial statements, company management and other relevant information. We have to look at different factors to determine whether economy is doing well or not. We have to study well about events like an increase or decrease in number of inflation or unemployment or interest rates affect a country's economy, and the reasons why they changes and how they affect economy. This kind of analysis reflects a country's current or future economic outlook. If economy is good, their currency strengthens. The growth and improvement of country's economy is the key of investment of foreign businesses and investors in that country. This results in the need of purchase of currency of that country. For example, U.S. dollar is gaining and becoming strong because the U.S. economy is also growing and improving. European euro is falling as the European economy growth slowing and getting down. Raising interest rates may be needed to control growth and inflation. Higher interest rate makes currency affected financial assets more attractive. Investor and traders buy such assets and the value of the currency increases. A very common tiny example, bank invites investor to invest in FD when interest rates are at high level. Later we will tell you which economic data and events affect economy and currency prices and reason behind them. You will know that how Fed Chairman meeting, retail sales data reflects the economy. Be sure that basically fundamental analysis is only great way of analyzing a currency through the strength or weakness of that country's economy. Sentiment Analysis In the market you may have heard many times; “Markets are booming and most of sectors are 20 to 50 percent up than before one or six month level.” OR “Markets are in full negative trend. Sectors are trading at 30 to 50 percent down than before. Prices are so cheap now. When market will stop falling?” Here the thought and opinion of each traders and technical analysis set sentiments. You learnt that price should theoretically accurately reflect all available market information but it isn't simple. The markets do not easily reflect all the information. Each trader and analyst have their own opinion about current market and future prediction. That’s why sometimes we should go with sentiment analysis. Market basically represents what all traders feel about the market. Each trader's thoughts and opinions form overall sentiment of the market. Sentiments are only to have general idea about trend of market. No matter how strongly you feel about market, you can't move the markets in your favor. Even if you truly believe that the dollar will be stronger, but others are bearish on dollar, you can’t do anything for so. At all it's only up to you how you consider the market, how you feeling, whether market is bullish or bearish. It's also up to you to consider market sentiment for your trading. You wish to ignore market sentiment or trade according to then. But sentiment analysis can be an important tool of analysis. We'll teach you how to analyze market sentiment and use it. Which Type of Analysis is Best? Hmmm..Tuff question. In the trading world, you will get advice from many experts for particular type of analysis and claiming the best one. Never be on one side. All above analysis are best on their own way. No one is better than another. There are only different ways to analyze the market. You should always follow which one suits your trading style and profitable for you. Technical analysis is the study of price movement on the charts and Fundamental analysis is study of many factors affect country's economy. Market sentiment analysis is only to analyze current trend of market whether it is bullish or bearish. Basically fundamental factors shape sentiment. Combination of all three will give you better trading ideas.. To become a perfect trader you will need to learn effectively use all these three types of analysis. Why so, let me explain you through example? Focusing on only one type of analysis can result in loss and unhappy trading. You are analyzing through charts and found good trading opportunity. You are willing to trade accordingly and raise the money. You believe that your trade idea is perfect. Then you will buy EUR/USD contract with a full positive attitude and trust on your trade. Even you may suggest you trade friends too for make same trade. All of a sudden the trade makes a 100 pip move in the opposite direction and price moves in un-favor of your trade. You might know or you may come to know, what happened? Europe’s GDP data to be released and Europe economy is not doing well due debt crisis. Just after your trade very poor GDP data released by Europe’s government and everyone's sentiment towards Europe’s market turns negative and everyone trades in the opposite direction! Your un-favored trade makes you unhappy and you are getting angry at your charts. You will claim charts to be wrong method of analysis. You will make loss of money. That’s all happened because you ignored fundamental analysis and sentimental analysis. Hope you got the point. Don't rely on just any one of all three. Where do we go from here? You have learned about type of analysis. Technical analysis is done through historical movement of prices which perfect data you already have. But fundamental analysis you may not have perfect data. You may know the Europe’s economy is not doing well but you can’t know exactly how bad or good GDP data of Europe will be released. For that we have wait for the sources. So now you will learn basic about technical analysis tools. You will truly love to follow them for your trading strategy. You will learn all about the price level action, e.g. support and resistance levels, candlestick formations, and common chart patterns. Technical analysis is a BIG subject in itself. It is not just like seeing up arrow or down arrow. It is complicated but very useful after you get the mastery. After learn the basic about technical analysis you will also learn more about advanced tools such as pivot points, divergences, Elliott Wave Theory, and Gartley patterns used in technical analysis. It is quite tuff and complicated to follow both fundamental and market sentiment analysis at the same time. It’s like shoot two targets with one arrow! As you learned, mostly fundamental factors shape market sentiment. That’s why we're putting fundamental and market sentiment analysis together. In upcoming topics you will learn more it Forex. Why one lesson simply won't be enough? Combining all three major type of analysis will make you Forex analysis master and help you create great profitable ideas mostly.
Pages to are hidden for
"Learn Three Type Forex Market Analysis Basics"Please download to view full document