Forex Trading for Beginners 2

What is Forex Analysis and How does it work?

 



Forex Technical Analysis
Technical analysis is use to forecasting the direction of prices through the study of past market data, primarily price and volume. Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, business cycles, stock market cycles or, classically, through recognition of chart patterns. The principles of technical analysis are derived from hundreds of years of financial market data. Some aspects of technical analysis began to appear in Amsterdam-based merchant Joseph de la Vega's accounts of the Dutch financial markets in the 17th century. In Asia, technical analysis is said to be a method developed by Homma Munehisa during the early 18th century which evolved into the use of candlestick techniques, and is today a technical analysis charting tool. In the 1920s and 1930s, Richard W. Schabacker published several books which continued the work of Charles Dow and William Peter Hamilton in their books Stock Market Theory and Practice and Technical Market Analysis. In 1948, Robert D. Edwards and John Magee published Technical Analysis of Stock Trends which is widely considered to be one of the seminal works of the discipline. It is exclusively concerned with trend analysis and chart patterns and remains in use to the present. 

Forex Technical analysis believe that prices trend directionally: up, down, or sideways or some combination. The basic definition of a price trend was originally put forward by Dow theory. Technical analysis believe that investors collectively repeat the behavior of the investors that preceded them. To a technician, the emotions in the market may be irrational, but they exist. Because investor behavior repeats itself so often, technicians believe that recognizable and predictable price patterns will develop on a chart. Recognition of these patterns can allow the technician to select trades that have a higher probability of success.



Forex Fundamental Analysis

Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements usually to analyze the business's assets, liabilities, earnings and competitors and markets. It also considers the overall state of the economy and factors including interest rates, production, earnings, employment, GDP, housing, manufacturing and management. There are two basic approaches that can be used: bottom up analysis and top down analysis. These terms are used to distinguish such analysis from other types of investment analysis, such as quantitative and technical. Fundamental analysis is one of the most time-consuming forms of analysis.

Forex Fundamental Analysis includes: economic analysis, industry analysis, company analysis. The real value of the shares is determined based upon these three analyses. It is this value that is considered the true value of the share. If the intrinsic value is higher than the market price, buying the share is recommended. If it is equal to market price, it is recommended to hold the share; and if it is less than the market price, then one should sell the shares.The analysis of a business health starts with a financial statement analysis that includes financial ratios. It looks at dividends paid, operating cash flow, new equity issues and capital financing.

Forex Technical Analysis & Forex Fundamental Analysis
Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis is the examination of multiple. Multiple encompasses the psychology generally abounding, i.e. the extent of willingness to Buy or Sell. Technical analysis analyzes price, volume, psychology, money flow and other market information, whereas fundamental analysis looks at the facts of the company, market, currency or commodity. Most large brokerages, trading groups, or financial institutions will typically have both a technical analysis and fundamental analysis team.

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