Market analysis is the most helpful tool to know the market and make good decisions. It helps examine the market and their competitors also. For example, if a company launches a new product, market analysis will help you observe the behaviour of the competitors.
Analysis are useful everytime it is needed to forecast the future prices of an underlying asset based on the past patterns and trends. They provide helping information before making decisions. How? By analysing economic, political and social forces which may impact assets prices.
A chart pattern that signals higher/ lower prices to come.
Prices rally to a new high/ fall to a new low while an oscillator fails to reach a new low/ peak.
A price moves for a short time above or below a resistance level, and after it comes back to the same direction when it started.
News produces movements in the markets.
Central banks would boost or ruin the economy by the interest rates they decide.
Technical analysis consists of examining past historical data of the assets and finding patterns, how they repeat, when they repeat and why the asset had that certain behaviour. This way, the trader will be able to make an accurate prediction about the near future price of the asset. There are packages of charts which bring assets prices in a graphical form, easy to analyse by the experts.
If a trader wants to open a trade on a currency pair, he cannot do so and succeed without checking on the price charts. He needs to know if he should go short or long.
Informed decisions are crucial to have successful trades. Autochartist is a free online service which analyses the prices automatically and suggests the most likely winning trend.
Future price direction will help traders to determine the kind of position they would open. As accurate the prediction would be, as higher are the changes to get profits from the invested capital.
When the price keeps going up and the trader is still in the money, technical analysis has already done a good job.
Fundamental analysis uses the impact of financial events and news on the prices of financial instruments. When it comes to stocks, it takes into consideration public data like revenues, earnings, future growth, return on equity to determine the future potential of the company. Economic Calendar is one of the tools which provide you with the financial events which are sure to happen.
It starts with the analysis of the broader macroeconomic factors and keeping only the ones which provide potential impact.
On the other hand, this analysis starts with the smallest influencing environment to macroeconomic information.
If a country has a large trade rate, it means it has a high demand for goods and services, this way its currency value will stay high.
This is mainly connected to the valuation of commodities. If a political conflict is growing, it may result to the growing demand for metals which are used in armaments and ammunition manufacturing.
Sentiment analysis represents a qualitative measure of the trader’s mood toward financial markets in general, or specific instruments in particular. Good mood to invest or bad mood to stay away from the market impact the state of the markets in the long term. Sentiment analysis is also the overall public opinions, feelings or approach that create the market psychology.