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Fundamental Analysis and Technical Analysis Which is Better

Fundamental Analysis and Technical Analysis. What is analysis in forex market? Type of analysis. PDF which is better. There are two possible methods for analysing markets in order to make decisions regarding trading: technical analysis and fundamental analysis.

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Fundamental Analysis and Technical Analysis

Fundamental Analysis and Technical Analysis

There are two possible methods for analysing markets in order to make decisions regarding trading: fundamental analysis and technical analysis.

Fundamental Analysis

Fundamental analysis focuses in spotting economical, social and political news & factors that may affect the price of a currency pair, a stock, an index etc. Analysts always try to find a fair price for a tradeable asset so they can investigate trading opportunities.

Technical Analysis

Technical analysis is a trading tool for spotting trading opportunities too but it is based on statistical analysis of charts and assets such as the price, the volume, the volatility etc. A basic technical analysis principle is that the market movements are not random and that somehow the past markets behaviour repeats itself in the future. Technical analysis has a series of tools such as technical indicators & oscillators, price action, patterns etc

Although fundamental analysis looks more simple and familiar, it has two very important disadvantages though:

  • An individual trader learns the market news most likely much later than the big players
  • An individual trader is not able to translate market news into trading action: it takes a lot of experience and knowledge in finance to do that.
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Facts on Technical Analysis

There are a number of momentum-based indicators, such as Bollinger Bands®, Chaikin Money Flow, stochastics and moving average convergence/divergence (MACD). Each of these have unique formulas and provide buy and sell signals based on varying criteria. Momentum indicators tend to be used in range-bound or trendless markets.

Fundamental Analysis and Technical Analysis

Fundamental Analysis and Technical Analysis

Heiken Ashi – a powerful indicator

There are many technical analysis indicators and tools but most of them are based on open/close/high/low prices of the bars. What if we could transform the default and usual bars into other bars in a sense of avoiding noise, false signals or spikes?

Heiken Ashi is a very popular and powerful indicator that redraws the usual candlesticks by using open/close/high/low from current and previous bars. More specifically:

  • Close is calculated as the average of open, close, high and low of the current bar: (Open(0)+Close(0)+High(0)+Low(0))/4
  • Open is calculated as the average of Heiken Ashi open and Heiken Ashi close of the previous bar: (HA_Open(1)+HA_Close(1))/2
  • High is the maximum of the high of the current bar, the current Heiken Ashi open and the current Heiken Ashi close: Max(High(0), HA_Open(0), HA_Close(0))
  • Low is the minimum of the low of the current bar, the current Heiken Ashi open and the current Heiken Ashi close: Min(Low(0), HA_Open(0), HA_Close(0))

A chart with Heiken Ashi indicator applies looks like the following chart image

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Fundamental Analysis and Technical Analysis

Heiken Ashi candlesticks are white when the Heiken Ashi Close is above the Heiken Ashi Open and red when the Heiken Ashi Close is below the Heiken Ashi Open.

The result is obvious: By using Heiken Ashi candlesticks instead of the default ones, we filter a lot of the noise. Also, by using Heiken Ashi we can spot the trend in a more accurate manner since a series of white Heiken Ashi candlesticks indicates and uptrend while a series of red Heiken Ashi candlesticks indicates a downtrend. By following the Heiken Ashi color allows us to remain with the trend without being influenced by the noise of small price fluctuations.

Also, the famous and popular Japanese Candlestick patterns can be applied in Heiken Ashi candlesticks and by filtering a portion of noise, in some cases it may perform even better.

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Fundamental Analysis and Technical Analysis

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Ejikeme Agbo is the founder and Partner at Fxkinfin Financial Advocates, owners of fxkinfin.com. He is a financial writer with extensive experience in print as well as online media.

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Market Analysis

USDCHF Breaks Above Support Level Ahead of US Confidence Data

USDCHF Breaks Above Support Level Ahead of American confidence data. What to expect in USDCHF Break next couple of days?

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USDCHF Breaks Above Support Level

USDCHF Breaks Above Support

The British pound declined today even after the relatively strong economic data from the country. The data showed that house prices rose by 13.4% year-on-year in June after rising by 10.9% in the previous month. This was the biggest increase since 2014. In total, the average price of houses in the UK has jumped by almost 30,000 pounds. Further data showed that the lending sector continued to do well in May. In total, mortgage lending increased from £3.03 billion to more than £6.58 billion. The number of mortgage approvals increased from 86.9k to more than 87.55k while net lending to individuals increased to £6.9 billion. The sterling is probably falling because of the rising number of coronavirus cases in the UK.

The euro declined against the US dollar even after the relatively strong Eurozone business and consumer confidence data. According to the European Commission, the industrial sentiment increased from 11.5 to 12.7 in June. This was a better increase than the median estimate of 12.3. Sentiment in the service sector also increased from 11.3 to 17.9. Further, the business and consumer survey increased from 114.5 to 117.9. These numbers are important because highly confident business and individuals lead to more spending. 

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US futures wavered ahead of the latest consumer confidence data by the Conference Board. Those linked to the Dow Jones rose by 60 points while Nasdaq 100 and S&P 500 were unchanged. The S&P 500 index had its 31st record close on Monday as investors cheered the new ruling on Facebook. The company won an antitrust case brought by the Federal Trade Commission (FTC) and states. The FTC wanted the court to order Facebook to divest its investments in Instagram and Whatsapp. Elsewhere in Europe, the main indices were in the green. The DAX, FTSE 100, and CAC 40 indices rose by more than 0.20%.

USDCHF Breaks Above Support Level

EURUSD

The EURUSD pair sell-off continued to decline even after the strong Eurozone confidence data. On the four-hour chart, the pair managed to move below the lower line of the red channel. The pair also managed to move below the 61.8% Fibonacci retracement level. Further, it fell below the 50-day moving average and is between the lower and middle lines of the Bollinger Bands. Therefore, the pair may keep falling, with the next key target being at 1.1870.

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USDCHF

The USDCHF held steady ahead of the latest US consumer confidence data. On the two-hour chart, the pair managed to move above the upper side of the bullish flag pattern shown in red. It also moved above the 50-day moving average and the 23.6% Fibonacci retracement level. The Relative Strength Index (RSI) has also kept rising. Therefore, the pair may keep rising as bulls target the next key resistance at 0.9238.

USDCHF Breaks Above Support Level

NAS100

The Nasdaq 100 index is hovering near its all-time high after the Facebook lawsuit. The index is trading at $14,503, which is above the 25, 50, and 100-day exponential moving averages. The MACD is above the neutral level while the Relative Strength Index (RSI) has continued rising. Therefore, the path of least resistance for the index is still upwards, with the next key target being at $15,000.

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USDCHF Breaks Above Support Level

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Market Analysis

EURUSD Crashes Below Key Support After HAWKISH FED Price Impact

EURUSD Crashes Below Key Support. The bank left interest rates at the historic low of between 0% and 0.25%.

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EURUSD Crashes Below Key Support

EURUSD Crashes Below Key Support

Global stocks retreated while bond yields rose as investors reacted to the latest Federal Reserve interest rate decision. The bank left interest rates at the historic low of between 0% and 0.25%. It also left its quantitative easing policy intact, meaning that it will continue buying assets worth $120 billion every month. The bank also provided hints that it will hike interest rates two times in 2023. The members also deliberated on its asset purchases, meaning that it will likely start tapering in the next few months. In the US, futures tied to the Dow Jones declined by more than 100 points while those linked to the S&P 500 also declined by 15 points.

The Swiss franc declined sharply after the latest interest rate decision by the Swiss National Bank (SNB). The bank decided to leave the interest rate unchanged at -0.75%, where it has been in the past few months. In a statement, the bank’s governor said that the Swiss franc was still overvalued against key currencies and that he remained committed to intervening when needed. The SNB expects that the Swiss economy will rise by 3.5% this year and that inflation will keep rising but remain below the 2% target level.

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EURUSD Crashes Below Key Support After HAWKISH FED News Impact

The euro continued to decline against the US dollar even after the relatively strong Eurozone inflation data. According to Eurostat, the headline CPI rose from 1.6% in April to 2.0% in May. This increase was in line with the median estimate by analysts and was on par with the ECB target. The core CPI that excludes the volatile food and energy products rose from 0.7% to 1.0%. Elsewhere in Europe, the Norwegian Central Bank left interest rates unchanged and hinted that it will hike in autumn.

EURUSD Crashes Below Key Support

  • EURUSD The EURUSD pair retreated after the FOMC decision. The pair fell to a low of 1.1950, which was the lowest it was since April. It also moved below the 50% Fibonacci retracement level and below the lower line of the descending channel. Therefore, the sell-off will likely continue falling as bears target the next key support at 1.1900.
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  • GBPUSD The GBPUSD pair declined sharply after the FOMC decision. The pair moved to 1.3965, which was the lowest level since early May. It has also moved below the 25-day and 15-day moving averages. It also moved to the 50% Fibonacci retracement level while the RSI moved below the oversold level. Before this drop, the pair was forming a head and shoulders pattern. Therefore, the pair will likely keep falling as bears target the next key support at 1.3890, which is along with the 61.8% retracement level.
  • USDCHF The USDCHF pair spiked after the relatively dovish SNB decision. The pair rose to 0.9147, which was the highest level since May. It also moved above the 25-day and 15-day moving averages. Other oscillators like the MACD and the Relative Strength Index (RSI) also rose sharply. Therefore, the pair may keep rising as the divergence between the SNB and Fed emerges.

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Market Analysis

Gold Price Chart Today June 9 Analysis, What to Expect!

Gold Price Chart Today. Gold posted a bullish “golden cross” formation this week that could suggest further gains are ahead. Gold Price Today. Gold Analysis Today.

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Gold Price Chart Today

Gold Price Chart Today Forecast

  • Gold posted a bullish “brilliant cross” arrangement this week that could propose further gains are ahead.
  • Gold bulls should stay away from additional shape talk that could start a USD rally and disabled person gold increases.
  • Bitcoin vs Gold: Differences Every trader should Know

GOLD PRICE CHART POSTS BULLISH “GOLDEN CROSS” FORMATION

Gold costs may keep on ascending after the valuable metal posted a bullish moving normal hybrid on the everyday graph early this week. The “brilliant cross” development happens when a more limited term moving normally overwhelms a more extended term moving normal and numerous merchants accept the hybrid as a clue that further gains could be available. On account of the gold value graph, the 50-day straightforward moving normal has overwhelmed the 200-day basic moving normally around the $1828 value point and may furnish gold with the bullish estimation needed to push higher.

Gold Price Chart Today: DAILY TIME FRAME (JULY 2020 – JUNE 2021)

Gold Price Chart Today

READ THE ORIGINAL ARTICLE AT DAILYFX CLICK HERE

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Market Analysis

3 Types of Analysis in Forex PDF in 2021

Types of Analysis in Forex Pdf. The 3 Most Common Types of Forex Market Analysis: 1) Technical Analysis. 2) Fundamental Analysis. 3) Sentiment Analysis. and how they help to shape a trading strategy.

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Types of Analysis in Forex

Types of Analysis in Forex

  1. Technical Analysis.
  2. Fundamental Analysis.
  3. Sentiment Analysis.

FOREX ANALYSIS TECHNIQUES TALKING POINTS:
There are three general types of forex analysis traders use to anticipate market movements and analyze trends.

Traders tend to use one or a combination of FX analysis methods to fit their personality and/or trading style. Types of Analysis in Forex Pdf
It can be useful to identify trades using the analytical approach in a forex practice account

There are several different ways to analyze the market in anticipation of trading. Although categories of analysis may be plentiful, traders should keep the analysis simple enough to identify good trading opportunities. Types of Analysis in Forex Pdf

This article explores the three most common forex analysis techniques: Fundamental, technical and sentiment analysis, and how they help to shape a trading strategy. Thereafter, it is up to the individual trader to try to find out what type of analysis suits their trading style.

Types of Analysis in Forex Pdf

Types of Analysis in Forex

THE 3 MOST COMMON TYPES OF FOREX MARKET ANALYSIS:

  • Technical

Forex technical analysis involves looking at patterns in price history to determine the higher probability time and place to enter a trade and exit a trade. As a result, technical analysis in forex is one of the most widely used types of analysis.

Since FX is one of the largest and most liquid markets, the movements on a chart from the price action generally gives clues about hidden levels of supply and demand. Other patterned behaviour such as which currencies are trending the strongest can be obtained by reviewing the price chart. An example of this can be seen below in the GBP/USD chart where the US dollar is strengthening against the Pound Sterling.

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Other technical studies can be conducted through the use of indicators. Many traders prefer using indicators because the signals are easy to read, and it makes forex trading simpler.

Technical versus fundamental analysis in forex is a widely debated topic. There is no right answer to the question of which type of analysis is better and traders tend to adopt one, or a combination of the two, in their analysis.

  • Fundamental

Forex fundamentals center mostly around the currency’s interest rate. This is because interest rates have a sizeable effect on the forex market. Other fundamental factors are included such as gross domestic product, inflation, manufacturing, economic growth activity. However, whether those other fundamental releases are good or bad is of less importance than how those releases affect that country’s interest rate.

Traders reviewing the fundamental releases should keep in mind how they might affect the future movement of interest rates. When investors are in a risk-seeking mode, money follows yield (currencies that offer a higher interest rate), and higher rates could mean more investment. When investors are in a risk-averse mentality, then money leaves yield for safe-haven currencies.

The DailyFX website offers a lot of assistance in identifying how a fundamental release could affect the value of the currency. Check out the economic calendar for events coming up this week.

  • Sentiment
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Forex sentiment is another widely popular form of analysis. When you see sentiment overwhelmingly positioned to one direction, this means the vast majority of traders are already committed to that position.

Perhaps this can be better explained with an example. Let’s assume that an overwhelming number of traders and investors are bullish the Euro. They think the Euro is going higher. Since people vote with their trades, we can assess through DailyFX (which uses IG Client Sentiment) that the EUR/USD sentiment shows a majority of traders are buyers in the currency pair.

Since we know there is a large pool of traders who have already BOUGHT, then these buyers become a future supply of sellers. We know that because eventually, they are going to want to close out the trade. That makes the EUR to USD vulnerable to a sharp pullback if these buyers turn around and sell to close out there trades.

More astute traders will analyze retail sentiment alongside sentiment at the institutional level. Senior Analyst at DailyFX, Tyler Yellexplains how traders can analyze the Commitment of Traders ( CoT) report for clues on how the institutional market is positioned and how to implement this analysis into their trading analysis.

Types of Analysis in Forex

Use fundamentals to assist in identifying a long-term trend:

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Analyzing a country’s GDP, interest rate and inflation rate provides insight into the strength of that country’s economy and by extension, its currency. For example, if the US begins an interest rate hiking cycle, the US dollar will look attractive. If enough investors/traders buy US dollars this will prop up the value of the USD.

Apply sound technical analysis to spot entries into the market:

Using multiple time frame analyses and an indicator like the MACD or Relative Strength Index traders can spot ideal entries into the market.

Consider client sentiment:

Traders can analyze client sentiment either by observing the net number of traders long or short or by trading the difference in net short/long movements. The main takeaway, however, is that retail clients tend to trade against prevailing trends, therefore, making client sentiment a contrarian indicator.

FURTHER READING TO TAKE YOUR FOREX TRADING TO THE NEXT LEVEL

If you are just starting on your forex trading journey you can learn the basics with our free New to Forex Guide.
We also offer a range of trading guides to supplement your forex knowledge and strategy development.
Our research team analyzed over 30 million live trades to uncover the Traits of Successful Traders Incorporate these traits to give yourself an edge in the markets.

Fxkinfin provides forex news and technical analysis of the trends that influence the global currency markets.

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