What is
Forex or Foreign Exchange: It is the largest financial market in the world,
with a volume of more than $1.5 trillion daily, dealing in currencies. Unlike
other financial markets, the Forex market has no physical location, no central
exchange. It operates through an electronic network of banks, corporations and
individuals trading one currency for another.
What about
Forecasting: Predicting current and future market trends using existing data
and facts. Analysts rely on technical and fundamental statistics to predict the
directions of the economy, stock market and individual securities.
For those
who trade using the Forex, or foreign currency exchange, knowing how to
forecast the Forex can make the difference between trading successfully and
losing money. When you begin learning about Forex trading, it is vital that you
understand how to forecast the Forex trading market.
There are a
few methods that are used when forecasting the Forex. Each system is used to
understand how the Forex works and how the fluctuations in the market can
affect traders and currency rates. The two methods that are most often used are
called technical analysis and fundamental analysis. Both methods differ in
their own ways, but each one can help the Forex trader understand how the rates
are affecting the currency trade. Most of the time, experienced traders and
brokers know each method and use a mixture of the two to trade on the Forex.
One method
used in forecasting foreign currency exchange is called technical analysis.
This method uses predictions by looking at trends in charts and graphs from
past Forex market happenings. This system is based on solid events that have
actually taken place in the Forex in the past. Many experience Forex traders
and brokers rely on this system because it follows actual trends and can be
quite reliable.
When looking
at the technical analysis in the Forex, there are three basic principles that
are used to make projections. These principles are based on the market action
in relation to current events, trends in price movements and past Forex
history. When the market action is looked at, everything from supply and
demand, current politics and the current state of the market are taken into
consideration. It is usually agreed that the actual price of the Forex is a
direct reflection of current events.
The trends
in price movement are another factor when using technical analysis. This means
that there are patterns in the market behavior that have been known to be a
contributing factor in the Forex. These patterns are usually repeating over
time and can often be a consistent factor when forecasting the Forex market.
Another factor that is taken into consideration when forecasting the Forex is
history. There are definite patterns in the market and these are usually reliable
factors. There are several charts that are taken into consideration when
forecasting the Forex market using technical analysis. The five categories that
are look at include indicators, number theory, waves, gaps and trends.
Most of
these can be quite complicated for those who are inexperienced using the Forex.
Most professional Forex brokers understand these charts and have the ability to
offer their clients well-informed advice about Forex trading.
Another way
that experienced brokers and traders in the Forex use to forecast the trends is
called fundamental analysis. This method is used to forecast the future of
price movements based on events that have not taken place yet. This can range
from political changes, environmental factors and even natural disasters.
Important factors and statistics are used to predict how it will affect supply
and demand and the rates of the Forex. Most of the time, this method is not a
reliable factor on its own, but is used in conjunction with technical analysis
to form opinion about the changes in the Forex market.
For those
interesting in being involved with Forex trading, a basic understanding of how
the system works is essential. Understanding both forecasting systems and how
they can predict the market trends will help Forex traders be successful with
their trading. Most experienced traders and brokers involved with the Forex use
a system of both technical and fundamental information when making decisions
about the Forex market. When used together, they can provide the trader with
invaluable information about where the currency trends are headed.
Always leave
the forecasting to the pros unless you are playing the Forex as a hobby and
don't have a lot of money invested...Or like most people you will learn the
hard way.
