Analysing the forex market
To understand how to trade forex, it helps to understand the background of the market. The forex market is the largest and most liquid in the world. A large proportion of the forex market’s activity is dominated by currency exchanges between large international banks. However, a small minority of the market’s activity is utilised by forex traders who attempt to take advantage of the price fluctuations that exist between currencies, with the hope of making a profit. Forex currencies are traded like any other asset class such as commodities, equities, indices and cryptocurrencies. To get started, read our article for recommendations on the most traded currency pairs within the market.
There are two types of analysis that traders use when analysing the forex market: technical analysis and fundamental analysis. Technical analysis is the study of past prices and patterns to determine future prices movements. Whereas fundamental analysis is the study of the factors that drive valuation such as economic and political trends.
Both fundamental and technical analysis should be understood when learning to trade forex. Both of these disciplines, in addition to a trading plan, are key to learning how to trade on the foreign exchange market. Check our article on the differences between technical and fundamental analysis.