Different Types of Market Analysis

Different Types of Forex Market Analysis for Trading and Investment

As a Forex trader, different types of forex market analysis is one of the most crucial things you can do. No matter if you are a new or a seasoned veteran, you need to be able to look at the market and analyze it critically to conceptualize the profitable trades.

Types of Market Analysis

There are three different types of Forex market analysis:

  1. Fundamental Analysis
  2. Technical Analysis
  3. Hybrid Analysis (Combination of Technical and Fundamental Analysis)

Fundamental Analysis

Fundamental Analysis is one of the most important types of market analysis techniques. In this type of analysis, the Forex trader takes into account what is happening in the economy of the country. This analysis involves the examination of the currency from economic, social, and political standpoints. Let’s take the example of Canadian Dollar and Australian Dollar (CAD/AUD). So, if we are trading CAD (Canadian Dollar), we have to look at the fundamentals of Canada and examine what is going on in the economy. There are different fundamentals like industries, housing, employment, trade, views of the key nationals of Canada, and the overall health of the economy. All of it would be considered in the fundamental analysis of Canada. Collectively, if all of these news and pointers are showing a positive picture, it suggests as a good time to trade in that currency. Similarly, if the Australian fundamentals are suggesting a negative picture, we can assume that it is a good time to sell the AUD and buy CAD.

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Technical Analysis

Technical Analysis is the idea of history repeats itself in predictable ways. This analysis can be used together with indicators with different patterns on the chart. In this type of Forex market analysis, we are only looking at the price movements in the past and using the same information to derive conclusions about the future market trends. Let’s take the example of the pair GBP/USD. In this case, suppose if the market has touched a certain level after which it started declining, we can safely assume that whenever the market hits that point again in the future, it will decline. This can be combined with different indicators and patterns on the charts.

Hybrid Analysis

This is a combination of both the above-mentioned different types of Forex market analysis. Taking the above example of GBP/USD, we can assume that once the point reaches in the technical analysis, and the pound is weakening due to the fundamental analysis, it is a good time to buy the USD and sell the GBP.  This is a widely used analysis technique because it takes into account both the factors. Although this technique does not have a name, we have named it Hybrid analysis just for the sake of your understanding.

Understanding the different types of Forex market analysis has a myriad of ways and traders use multiple ways for their analysis. This is just a suggestion of how you can do it. This is just a brief overview of the types of market analysis and how you can use them to turn the tables in your favour.

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