To make informed decisions and mitigate risks, businessmen analyze and predict foreign exchange markets. It helps them strategize on when to buy or sell currencies amidst the ever-changing current pair prices, with an aim of making the best profit. Thus, predicting the market is one skill to be mastered if you want to invest on foreign exchange.
Forex analysts developed ways on how businessmen, banks, hedge funds, traders, and companies determine the factors that affect the movement of prices. These are (1) technical analysis and (2) fundamental analysis. If you want to have the best forecast, using both methods will certainly make that happen.
In technical analysis, it is important to look on the past movement of prices to predict its future value. This is due to the belief that price movements are predictable by inspecting the behavior of a currency of a period of time. In this method, automated technical analysis is used by advisors or robots to tell forecasts. For example, a Forex broker in Vietnam may look into Forex signals or an alert on trading opportunities, the economic calendar, or economic events and market news in Southeast Asia or other nearby countries before taking the plunge in Forex trade.
This method is also considered the easiest way to master as it relies on the recent data on price movement such as price charts and interest rate, among others. These indicators can form repeated patterns which usually develop into trends. The strengths and weaknesses of these trends will determine the course of your trading plan and having a strong technical analysis will help you create good entry and exit points. Learning this method will definitely help you make a smart move in your investments.
The movement of prices is not only determined by repeated patterns and trends; political climate, inflation, economic growth, and manufacturing are some factors that affect the forex market. This is why it is important to have a fundamental analysis or quantifying the given factors to determine if it’s good to invest in a certain country or not.
When finding a strong player in the forex market, a Forex broker in Vietnam, for example, may look into the economic activity of Thailand, Malaysia, and Philippine and see which of these countries have a good economic activity. He can compare the GDP or the status of employment in these countries, which are drivers of high interest rates. Whichever country has the highest interest rate could be the best place to divert one’s assets into. However, it is also relevant to remember that these predictors can change easily.
Foreign exchange is affected by many factors and it is important to look on all these to generate favorable results. Although the forex market is volatile and its indicators may be unsteady, there are trading softwares that could reduce the difficulty in dealing with numerous calculations. The technical and fundamental modes of analysis to predict the foreign market are both essential ways to maximize the efficiency in trading. A smart investor will surely use both strategically.