Measure content performance. Develop and improve products. List of Partners vendors. Those trading in the foreign exchange market forex rely on the same two basic forms of analysis that are used in the stock market: fundamental analysis and technical analysis.

The uses of technical analysis in forex are much the same: the price is assumed to reflect all news, and the charts are the objects of analysis.

But unlike companies, countries have no balance sheets, so how can fundamental analysis be conducted on a currency? Since fundamental analysis is about looking at the intrinsic value of an investment, its application in forex entails looking at the economic conditions that affect the valuation of a nation's currency.

Here we look at some of the major fundamental factors that play a role in a currency's movement.

Economic indicators are reports released by the government or a private organization that details a country's economic performance. Economic reports are the means by which a country's economic health is directly measured, but remember that many factors and policies will affect a nation's economic performance. These reports are released at scheduled times, providing the market with an indication of whether a nation's economy has improved or declined. These reports' effects are comparable to how earnings reports , SEC filings, and other releases may affect securities.

1. Advanced Fundamental Analysis Forex;
2. hkex option trading hours.
3. The Fundamentals of Forex Fundamentals?
4. start own forex company.

In forex, as in the stock market, any deviation from the norm can cause large price and volume movements. You may recognize some of these economic reports, such as the unemployment numbers, which are well-publicized. Others, like housing stats, receive less coverage. However, each indicator serves a particular purpose and can be useful. GDP is considered the broadest measure of a country's economy, and it represents the total market value of all goods and services produced in a country during a given year.

Since the GDP figure itself is often considered a lagging indicator , most traders focus on the two reports that are issued in the months before the final GDP figures: the advance report and the preliminary report. Significant revisions between these reports can cause considerable volatility. The GDP is somewhat analogous to the gross profit margin of a publicly traded company in that they are both measures of internal growth.

• Forex Trading - Advanced Fundamental Analysis | Online Course .
• unusual stock options activity.
• how much does a full time forex trader make?
• News that Matters?

The retail-sales report measures the total receipts of all retail stores in a given country. This measurement is derived from a diverse sample of retail stores throughout a nation. The report is particularly useful as a timely indicator of broad consumer spending patterns that is adjusted for seasonal variables. It can be used to predict the performance of more important lagging indicators and to assess the immediate direction of an economy.

Revisions to advanced reports of retail sales can cause significant volatility. The retail sales report can be compared to the sales activity of a publicly-traded company. This report shows a change in the production of factories, mines, and utilities within a nation. It also reports their " capacity utilization ," the degree to which each factory's capacity is being used. It is ideal for a nation to see a production increase while being at its maximum or near-maximum capacity utilization. Traders using this indicator are usually concerned with utility production, which can be extremely volatile since the utility industry, and in turn, the trading of and demand for energy is heavily affected by changes in weather.

Significant revisions between reports can be caused by weather changes, which in turn can cause volatility in the nation's currency. The CPI measures change in the prices of consumer goods across over different categories. This report, when compared to a nation's exports, can be used to see if a country is making or losing money on its products and services. Be careful, however, to monitor the exports — it is a popular focus with many traders because the prices of exports often change relative to a currency's strength or weakness. And don't forget the many privately issued reports, the most famous of which is the Michigan Consumer Confidence Survey.

All of these provide a valuable resource to traders if used properly. Since economic indicators gauge a country's economic state, changes in the conditions reported will therefore directly affect the price and volume of a country's currency. The size of the first candle can vary from chart to chart and it is the second or 'engulfing' candle that signals the change in trend. Ideally, the high should extend above the previous candle's high and a new low should be created — signifying renewed downward selling pressure.

The below example shows the price of oil, and each candle represents one hour of trading. Learn more about trading with different chart timeframes. As with all other trading strategies, candlestick charts should be used in conjunction with other forms of analysis to weigh up when market sentiment may be shifting.

Many traders will use technical indicators to figure out market direction. One variation of the indicator approach is to look for divergences. This is where the price does one thing but the indicator does something else — it can be a sign that a trend is running out of steam, offering the opportunity to profit from a move in the other direction. In the chart above, it can be seen that there is a significant slide in the price of gold, as indicated by the red and blue arrows, and the RSI becomes very oversold, pointing to how weak the market has been.

Later in the same month and the following month, the price of gold slips further, below those previous lows. But interestingly, the RSI has started moving higher.



This is bullish divergence — and can be a suggestion that the downtrend is running out of steam, which proved to be the case in this example. For every positive pattern, there is usually a negative alternative and this is also the case when it comes to divergence. When a market is making higher highs, but the RSI is not following suit, this is referred to as 'bearish divergence' and can be a warning that a top is near. As indicated by the blue and red arrows below, the market was strong towards the middle of the month but the RSI then makes a lower high than previously, suggesting that momentum may be starting to fade away.

This divergence approach using indicators is thought to be more reliable than just using them as simple overbought or oversold signals. As ever, nothing works all the time but they can help to 'take the temperature' of a market and act as a warning that a previously good trend could be about to stall.



• spread meaning in forex.
• capital gains exemption stock options.
• 10 Best Online Courses For Fundamental Analysis [] [UPDATED];
• The Best Fundamental Analysis Software For Forex Trading - Admirals.

As mentioned before, no trading strategy is right all of the time but even false signals can give a hint into market direction. But a lot of the time this does not happen. This false breakout can still give us an aggressive trading strategy and is a useful bit of technical analysis on its own. Learn how to identify breakout stocks.

Technical analysis and fundamental analysis are the two main approaches to analysing securities.

Read Advanced Technical Analysis For Forex Online by Wayne Walker | Books

It uses techniques like statistical analysis and behavioural economics. Fundamental analysis, on the other hand, attempts to measure the intrinsic value of a security. It involves the study of overall economic and industry conditions. It also looks at the financial conditions and management of companies through company analysis.

Things like earnings, expenses, assets and liabilities are important to fundamental analysts. Technical analysis and fundamental analysis are often seen as opposing approaches.

The Role of Central Banks

However, it is possible to combine the two. A technical analyst may use fundamental analysis to support some of their trades, and vice versa. For example, fundamental analysis could be used to research an undervalued stock. Technical analysis could then be used to find a specific entry and exit point. As a new trader, which path should you follow and what approach works best? The honest answer is both!

Related Topics

It is possible to make money using either technical or fundamental analysis, but maybe there is a happy middle ground where a blended style could give the best outcome. It certainly pays to be aware when major fundamental news is being released. At the very least, even the most committed chart traders should know when the various central banks around the world are due to announce interest rate or other policy decisions. This, coupled with the release of major data such as unemployment numbers, can really move the markets.

Trading with a head-in-the-sand approach around these releases can be expensive, as market volatility often picks up. All of the above strategies can be used effectively within the financial markets , so you can pick a form of technical analysis that is best suited to your trading plan and overall goals. When it comes to trading risk management , this is another area where a combination of the technical and fundamental approach could work. Economic news may tell you that the market's attitude towards a certain financial asset is changing but it does not necessarily tell you when your view on the market is wrong.

Using traditional chart points such as support and trend, for example, the fundamentally-biased trader can manage the risk on his revised market view if that proves ultimately to be incorrect.