Tools and Techniques
Traders use Forex analysis to determine whether to buy or sell a currency pair at a given time. Forex analysis could be technical in nature, using charting tools, or fundamental in nature, using economic indicators and news based events.
Technical Analysis is used to ‘’predict’’ the future financial price movements based on an analysis of past price movements. Technical analysis can help investors anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.
Fundamental analysis is the examination of the underlying forces that affect the stability of the economy and companies. As with the technical analysis, the goal is to forecast future price movements, which may eventually lead to making a profit.
At the company level, fundamental analysis usually involves analyzing financial data, management, business concept and competition.
Usually, however there is also an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis focuses on economic data to assess the present and future growth of the economy.
To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis and derives a stock’s current fair value to forecast future value.