How to determine forex trade direction?
There are two main schools of analysis to predict the future direction of the price. First, there is technical analysis, and second, fundamental analysis.
Technical analysis relies on previous price moves to predict the future direction of the price. It uses indicators like oscillators and moving averages to give you signals that you can act on. It also relies on patterns of price movement such as three-wave corrections, flags, and triangles to predict where the price is heading next.
Fundamental analysis, on the other hand, relies on events in the real world and data releases, such as retail sales data, unemployment figures, Growth in GDP, rate hike or decrease expectations, statements from politicians, and other real events. In other words, fundamental analysis focuses on actual data and events, whereas technical analysis focuses on sentiment, which you can read from the price action.
There is a lot of debate about which of the methods is better. However, there are no conclusive answers. Both methods have their advantages and disadvantages. Many successful traders say that the two methods are not mutually exclusive and that combining both methods offers the best results. Those traders rely on fundamental analysis to predict the future direction of the price and then rely on technical analysis to identify a good entry point.
It is also worth noting that the ability to predict future price moves is necessary, but it is not enough on its own for trading success, as it needs to be supplemented with excellent risk management skills.
Technical analysis relies on previous price moves to predict the future direction of the price. It uses indicators like oscillators and moving averages to give you signals that you can act on. It also relies on patterns of price movement such as three-wave corrections, flags, and triangles to predict where the price is heading next.
Fundamental analysis, on the other hand, relies on events in the real world and data releases, such as retail sales data, unemployment figures, Growth in GDP, rate hike or decrease expectations, statements from politicians, and other real events. In other words, fundamental analysis focuses on actual data and events, whereas technical analysis focuses on sentiment, which you can read from the price action.
There is a lot of debate about which of the methods is better. However, there are no conclusive answers. Both methods have their advantages and disadvantages. Many successful traders say that the two methods are not mutually exclusive and that combining both methods offers the best results. Those traders rely on fundamental analysis to predict the future direction of the price and then rely on technical analysis to identify a good entry point.
It is also worth noting that the ability to predict future price moves is necessary, but it is not enough on its own for trading success, as it needs to be supplemented with excellent risk management skills.