To make any significant headway in financial markets, you have to be able to make predictions. Trading currencies are no different as interested investors would need to be able to make good forex predictions.
The forex market is the largest of all financial markets. It is basically an international decentralized market for currency trading. There are various participants in this market ranging from hedge funds to commercial enterprises to leading banks.
In order to lower the risk of your investment, it’s important for an investor to predict the movements in the market. As a result, any investor in this market should be thoroughly knowledgeable about a variety of factors that influence movements in the market.
But there’s no such thing as a perfect forex prediction formula. It will all be relative to your skills, knowledge, and experience. However, here are some factors that will impact the market that you need to be aware of:
This is not an easy task as there will be loads of macro and micro factors that you have to keep track of over a period of time.
One core skill needed for a successful forex trader is the ability to identify market trends. For example, if the market is rising, you may not want to take any position that goes completely in the opposite direction.
There are many trends in the forex market, but there are three that stand out. These are downtrend, uptrend, and sideways trend. This means that if the trend is moving upwards in relation to the graph, the chosen currency is actually appreciating. If it’s on a downward trend, then the opposite is true.
If the trend is said to be sideways, this means that the particular currency is stable and isn’t moving in any direction.
There are many ways of conducting an analysis of the forex market, but the most popular of these are fundamental analysis and technical analysis.
An FX fundamental analysis will focus on the following variables:
A FX technical analysis, on the other hand, will focus on past market data and price data. Investors who depend on a technical analysis to make a prediction tend to believe that history repeats itself.
So it comes down to focusing on the patterns to predict movements in price. Those following this method also believe that fluctuations in price aren’t random.