Forex analysis and forecasting methods

FOREX analysis methods

As you understand, the secret lies in the ability to determine future market movements and intelligently manage your portfolio. To anticipate the market, there are two main branches of forex analysis: graphical analysis and fundamental analysis.
These two types of analysis help to understand the mechanisms and factors involved in future movements of currency pairs.

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We will quickly fly over the principles of the two branches of analysis. More comprehensive courses for their subjects are available in the "Intermediate Courses" section (Fundamental Analysis and Technical Analysis).




What is graphical analysis?

Graphical analysis (also called analytic or technical) is the study of Forex charts. These studies are usually done using different forex indicators.

The idea is quite similar to the meteorological study (even if the comparison is popularized). A meteorologist, to make weather forecasts, will consult various indicators such as temperature, hygrometry, pressure, wind ... etc. By cross-checking this information, and making the analogy with what he already knows, the meteorologist will then be able to decide on future forecasts with more or less certainty.

The trader who performs graphical analysis, will study the graphs of different parities, using indicators such as oscillators, moving averages, volume indices, horizontal or oblique lines ... etc. By cross-checking this information, with experience, the trader will then be able to highlight particular contexts or the course will be more likely to go up or down. And this, by estimating how much.

As you have understood, this is an estimate with more or less certainty. (The meteorologist, too, is regularly wrong!). The goal is not to be right every time (which is totally impossible, if someone tells you the opposite, beware !!!), the goal is to be right more than one times out of two. Or of the month to have a sum of profits more important than that of the losses.




Some graphical analyzes are generated directly by computer. Software developed by traders, themselves cut the information of the chosen indicators and then provide indications of purchase or sale. These programs are usually called expert advisor or trading system.

What is fundamental analysis?

Fundamental analysis is based on the economic climate. There are two types of fundamental analysis. The first is to take long positions (up to several months) based on the deep economic climate giving the trend to a currency. This analysis is very complicated because it requires increased knowledge as well as the ability to access critical information inaccessible to individual traders. The second branch of fundamental analysis involves trading many small economic news.

Indeed, several times a day, results of economic ads are revealed at specific times. Their result, when it diverges with the result that was commonly expected, then causes more or less strong upward or downward acceleration, depending on the figure disclosed.

For example, there are announcements of employment rates, unemployment, the results of trade balances, consumption indices, interest rates, or leaders' speeches on a state's future monetary policy. .

All of these ads are indicative of the economic climate of a currency (or country) and can therefore trigger a strong impact on the market. It is on this principle that our fundamental analysis tool is based by delivering the necessary information to decipher the impact caused by each of these economic events.