What is the Best Forex Analysis Method?

September 6, 2022

Forex analysis is a trading method forex day retail traders use to determine whether to buy or sell the currency pairs. Although forex analysis is a little technical, as it involves the application of resources such as charting softwares, it can also be considered fundamental due to the involvement of economic indicators. One of the most important aspects of analysis in forex trading is that it is wholly based on news-based events.

Forex Market Analysis: The Different Types

If you are new to forex trading, the concept of forex analysis might appear ambiguous to you. So, to have a better understanding, let’s go through the different types of forex market analysis:

  • Fundamental Analysis

Fundamental analysis analyzes the changes occurring in the foreign exchange market by analyzing critical economic data including, interest rate, unemployment rate, GDP, and more. For example, if a forex trader wishes to conduct the fundamental analysis of a currency pair, say EUR/USD, he needs information about the prevailing interest rate of the Eurozone rather than that of the U.S. he also needs to be updated about any important economic event in every Eurozone nation.

  • Technical Analysis

The technical analysis is available in two systems: manual as well as automated. A manual system refers to a system where the trader analyzes various technical indicators and then interprets the data to determine whether to buy or sell a particular currency pair. On the other hand, in automated trading analysis, the trader instructs the system to search for particular signals and analyze them to execute the buy or sell decision. Automated analysis has a greater merit over the manual one because it takes the emotional aspect of the traders out of the trading decisions.

  • Weekend Analysis

Particularly, there exist two reasons traders should go for a weekend analysis. Firstly, to have a “bigger picture” of a specific market which interests the trader. The second reason to do a weekend analysis is that it helps traders set up their trading plan for the upcoming week. A weekend analysis is similar to an architect who prepares a blueprint before starting construction for smooth execution. You might feel that it is acceptable to trade without an effective trading plan. However, it can be a bad idea in the long run as it can leave a massive hole in your pocket.

How to Apply Forex Market Analysis?

  1. Recognize the Drivers

The ladder to trade successfully is to have an in-depth knowledge of the relationships between the markets and know why such relationships exist in the first place. Understanding these relationships is vital to being alert and cautious while trading. Additionally, remember that these relationships may change over time. Therefore, you must know why particular things are happening in the market and what is the driving force behind such market actions.

2. Chart the Indexes

A trader can chart the significant indexes for every market for a particular time frame. It helps him to depict relationships between various markets.

3. Search for a Consensus in the Markets

The traders must check if the markets reach a consensus by charting instruments on a regular basis. With this, they could take advantage to execute a trade in a trading instrument influenced by the consensus.

4. Time your Trades

You can increase your chances of making a trade successful by turning points on the long time periods and then coming to the short time frame. Patience and preparation can separate you from other traders who only trade without preparing or analyzing numerous forex indicators.

How to Acquire Forex Trading Strategies?

A day trader can apply the forex trading strategies manually or use the automated forex trading system for technical and fundamental analysis. They come in various options; some are free of cost, others come at a certain fee, and some can also be developed to cater to the needs of tech-savvy traders.

Both automated and manual trading strategies can be purchased on the internet. But, traders should keep in mind that there’s no one trading system to guarantee success. If a seller says his system is a full-proof money-making machine, don’t get fooled because if that were the case, he might have kept it with himself in a locker, which is what big financial firms do to keep their trading systems safe.


To conclude, one can say that there is no single best forex analysis method. Both technical and fundamental analysis methods have their pros and cons. Hence, the most suitable option for a trader is to determine his time frame and information access. A short-term trader can bear delayed information related to economic events but must have real-time access to quotes at all times. Therefore, technical analysis is the best method for him. On the other hand, long-term traders require access to the latest news and economic events, therefore fundamental analysis is best for them. Additionally, a weekend analysis can be conducted by both if the market is not fluctuating much.

Author myfxstreet