Of all the moving parts involved in trading forex, interpreting the signals the market gives you is the most important. They are what allows you to make decisions about entering and exiting trades, position size and everything else that makes trading profitable. Here's the important stuff you need to know about analyzing the market to find those signals.
As a trader, these signals are the critical information you always need to be looking for. That's because they can happen at any time of the day or night, and can often require immediate action if you want to take advantage of them. So what do you feel is the the best way to learn how to spot the signals the market is giving you?
Honestly, understanding what the market is saying is a skill you only acquire through ongoing study and lots of trading experience. With that understanding, the first thing to master should be distinguishing between the useful clues, and those that aren't. But before you can interpret and profit from the market's activity, you need to understand the basics of the main types of analysis.
There are broadly two kinds of analysts who study the market trying to work out which way it might be headed. Some use technical analysis and others use fundamental analysis. Let's cover each each type so you'll understand what we're talking about.
Technical analysis (TA) focuses on understanding and reading historical data that has been turned into price charts and indicators. You don't need special knowledge of economic events or politics to understand Technical Analysis. For that reason, it's usually best to start here, and then move on to fundamental analysis later.
Understanding technical analysis means you can read and act upon the signals given by price charts and indicators. Once you can confidently read a chart, you'll be able to easily see changes in trend, or when a market is likely to continue in the same direction, which can help you to enter and exit the market at the most opportune time.
Fundamental analysis on the other hand looks at political and economic events, and ignores price charts and technical indicators. It only considers factors like economic policy, news and current events. Government announcements that affect the economy are also factored in, as these can move markets one way or the other very quickly.
Those who prefer fundamental analysts believe technical analysis only tells you what has happened in the past, but it cannot predict the future. In their minds, prices are related to profits, which are affected by fundamentals more than anything else.
Being able to understand the market and then acting on that analysis is the most important part of trading forex successfully. That's why you should endeavor to learn both types of analysis. Understanding both the technicals and fundamentals will help you identify and trade market signals profitably.
As a trader, these signals are the critical information you always need to be looking for. That's because they can happen at any time of the day or night, and can often require immediate action if you want to take advantage of them. So what do you feel is the the best way to learn how to spot the signals the market is giving you?
Honestly, understanding what the market is saying is a skill you only acquire through ongoing study and lots of trading experience. With that understanding, the first thing to master should be distinguishing between the useful clues, and those that aren't. But before you can interpret and profit from the market's activity, you need to understand the basics of the main types of analysis.
There are broadly two kinds of analysts who study the market trying to work out which way it might be headed. Some use technical analysis and others use fundamental analysis. Let's cover each each type so you'll understand what we're talking about.
Technical analysis (TA) focuses on understanding and reading historical data that has been turned into price charts and indicators. You don't need special knowledge of economic events or politics to understand Technical Analysis. For that reason, it's usually best to start here, and then move on to fundamental analysis later.
Understanding technical analysis means you can read and act upon the signals given by price charts and indicators. Once you can confidently read a chart, you'll be able to easily see changes in trend, or when a market is likely to continue in the same direction, which can help you to enter and exit the market at the most opportune time.
Fundamental analysis on the other hand looks at political and economic events, and ignores price charts and technical indicators. It only considers factors like economic policy, news and current events. Government announcements that affect the economy are also factored in, as these can move markets one way or the other very quickly.
Those who prefer fundamental analysts believe technical analysis only tells you what has happened in the past, but it cannot predict the future. In their minds, prices are related to profits, which are affected by fundamentals more than anything else.
Being able to understand the market and then acting on that analysis is the most important part of trading forex successfully. That's why you should endeavor to learn both types of analysis. Understanding both the technicals and fundamentals will help you identify and trade market signals profitably.
About the Author:
To learn more about becoming a profitable trader, read this fibonacci forex trading article to see how to use this proven technique in your trading. Then read through the other posts to find the best advice on building a forex trading business.
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