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Vital Factors in Doing Forex Trading Market Analysis ď‚— Trader goals
The right type of analysis to use depends on what traders want to achieve, their time frame, and the available information. As Business Week Personal Business co-founder Troy Segal puts it, “There is no best method of analysis for forex trading between technical and fundamental.� To choose the right method, a trader needs to determine the preferred approach and other variables.
ď‚— Market drivers
Certainly, an analysis is not possible without data. With forex analysis, the data comes from various sources and are in different forms. Traders have to examine the impact of these market drivers and their relationship with each other to have an idea of how the exchange rates will move. Interest rates, for one, affect foreign exchange with their increase generally resulting in a stronger currency.
ď‚— Perspectives
With the right analysis approach chosen and the market drivers identified, the next step is to put things into perspective. The data collected need to be processed into useful forms such as charts and graphs. Visualizations greatly help in evaluating and appreciating data to be used in decision making. It also has to be emphasized that the analysis cannot be limited to one or a few countries since forex rates are affected by what happens on the macro scale.