What is Forex or Foreign Exchange: It is the largest financial
market in the world, with a volume of more than $1.5 trillion daily,
dealing in currencies. Unlike other financial markets, the Forex market
has no physical location, no central exchange. It operates through an
electronic network of banks, corporations and individuals trading one
currency for another.
What about Forecasting: Predicting current and future market
trends using existing data and facts. Analysts rely on technical and
fundamental statistics to predict the directions of the economy, stock
market and individual securities.
For those who trade using the Forex, or foreign currency
exchange, knowing how to forecast the Forex can make the difference
between trading successfully and losing money. When you begin learning
about Forex trading, it is vital that you understand how to forecast
the Forex trading market.
There are a few methods that are used when forecasting the
Forex. Each system is used to understand how the Forex works and how
the fluctuations in the market can affect traders and currency rates.
The two methods that are most often used are called technical analysis
and fundamental analysis. Both methods differ in their own ways, but
each one can help the Forex trader understand how the rates are
affecting the currency trade. Most of the time, experienced traders and
brokers know each method and use a mixture of the two to trade on the
One method used in forecasting foreign currency exchange is
called technical analysis. This method uses predictions by looking at
trends in charts and graphs from past Forex market happenings. This
system is based on solid events that have actually taken place in the
Forex in the past. Many experience Forex traders and brokers rely on
this system because it follows actual trends and can be quite reliable.
When looking at the technical analysis in the Forex, there are
three basic principles that are used to make projections. These
principles are based on the market action in relation to current
events, trends in price movements and past Forex history. When the
market action is looked at, everything from supply and demand, current
politics and the current state of the market are taken into
consideration. It is usually agreed that the actual price of the Forex
is a direct reflection of current events.
The trends in price movement are another factor when using
technical analysis. This means that there are patterns in the market
behavior that have been known to be a contributing factor in the Forex.
These patterns are usually repeating over time and can often be a
consistent factor when forecasting the Forex market. Another factor
that is taken into consideration when forecasting the Forex is history.
There are definite patterns in the market and these are usually
reliable factors. There are several charts that are taken into
consideration when forecasting the Forex market using technical
analysis. The five categories that are look at include indicators,
number theory, waves, gaps and trends.
Most of these can be quite complicated for those who are
inexperienced using the Forex. Most professional Forex brokers
understand these charts and have the ability to offer their clients
well-informed advice about Forex trading.
Another way that experienced brokers and traders in the Forex
use to forecast the trends is called fundamental analysis. This method
is used to forecast the future of price movements based on events that
have not taken place yet. This can range from political changes,
environmental factors and even natural disasters. Important factors and
statistics are used to predict how it will affect supply and demand and
the rates of the Forex. Most of the time, this method is not a reliable
factor on its own, but is used in conjunction with technical analysis
to form opinion about the changes in the Forex market.
For those interesting in being involved with Forex trading, a
basic understanding of how the system works is essential. Understanding
both forecasting systems and how they can predict the market trends
will help Forex traders be successful with their trading. Most
experienced traders and brokers involved with the Forex use a system of
both technical and fundamental information when making decisions about
the Forex market. When used together, they can provide the trader with
invaluable information about where the currency trends are headed.
Always leave the forecasting to the pros unless you are
playing the Forex as a hobby and don't have a lot of money
invested...Or like most people you will learn the hard way.
by David Mclauchlan