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One of the most common beginners’ mistakes in the forex market is that they try to guess the trends’ direction without a proper analysis of the market conditions. Such an approach is exceptionally based on personal intuition and feelings. However, experienced traders know that the ability to predict trends is required to get consistent profits. These skills will help to foresee assets’ prices and make the right decision at the right moment.

Traders should understand factors influencing price fluctuations if they want to be successful in the market. When we talk about global and local macroeconomic factors, currency quotes might be affected by the interest rates, imports and exports volume, central banks’ monetary policy, geopolitical stability as well as the economic growth. A trader, who watches the macroeconomic and political environment closely, might reach unbelievable results, but the practise shows that it’s tough to cover all those factors for one person. Unique analysis instruments might help in that case, developed by professional market analysts. Let’s have a look at the wide variety of tools offered by FinmaxFX brokerage company.

Fundamental analysis

Various types of macroeconomic reports and indicators impact assets prices. Analysts usually take into the account the change of gross domestic product, the pace of national currency devaluation, and countries’ economic growth to compose a valuable forecast for any particular asset which might be related to several regions at the same time. For example, the most popular currency pair – EUR/USD – is traditionally vulnerable to change in the macroeconomic situation in both sides of the Atlantic – the European Union and the United States. If the data was worse than expected in the Eurozone and US reports came in much stronger than economists were predicting, then an additional demand would appear for the US dollar, while Euro exchange rate will be lower as traders and investors will sell EUR/USD in that case. Therefore, the two regions or countries could have an unexpected impact on one single currency pair.

The most influential effect on the foreign exchange market is usually noticed in the United States as the country leads the world’s economy. For instance, high volatility starts when US reports are published such as Non-Farm Payrolls report, Consumer Price Index, Manufacturing Purchase Managers Index and so on. At the same time, monetary policy officials and politicians could affect currency pairs by verbal impact when they talk about economic outlook or projections in press conferences. Other countries and regions also matter for the global economy as we’re living in a transparent world and financial markets aren’t in a vacuum, different sectors correlate to each other. That means that the overall situation has to be taken into the account when making the fundamental analysis, it’s impossible to make a reliable forecast by one single report.

FinmaxFX provides all the information needed to assess the influence of political and economic events on the foreign exchange market. The data is represented inconvenient economic calendar. It shows events, assets that might be affected, scheduled time of the release and the grade of importance for every report published. Actual data, past revisions and expectations are indicated as well. Therefore, traders can quickly react to changing the environment from the fundamental side of things, and make a proper trading decision, leading the game and staying in front of the crowd. Another productive advantage of the tool is that traders can plan the trading process, schedule trading activity and choose active hours when the most profits are made. The brokerage company also updates clients with actual financial news and analytical materials available on the website. So traders can understand the reasons why this particular asset started climbing while the other one plunged.

Financial news

 

The interest rates, unemployment level and GDP traditionally have the most impact on the foreign exchange market. If the level of the interest rates rose in a particular country, then its national currency would gain strength due to the higher demand and investment flows. That factor is widely used by currency speculators and traders to make profitable entries. At the same time, if the unemployment rate grew in some country, that would be a sign of an economic slowdown, which would lead to lower interest rates and thus a descending trend would take place for the national currency. Trade balance narrowing surplus could affect any currency in the same way, while higher GDP growth would lead to the interest rate hike and a stronger currency.

Knowledge about correlations between economic indicators and currency pairs price action, as well as using FinmaxFX economic calendar, would help traders to increase the efficiency and profitability of trading in the financial market.

Technical analysis

Historical performance and data work as the background for technical analysis. The main idea is that any price action has specific tendencies and mathematical formulas can develop an individual model, forecasting asset prices. The market is always cyclical, while prices always move like waves, whether that’s a robust one-way trend when prices move sharply or a sideways consolidation range when rates are hovering around some stable levels. The primary goal of the technical analysis is to detect those models and tendencies, which will allow traders to make a more efficient prediction. FinmaxFX clients can benefit from using trading signals delivered by one of the world’s leading technical analysis companies – Trading Central. Accounts with a balance of $5K+ can get access to those active signals free of charge.

Traders may use trading volume diagrams, price charts and other mathematical tools representing the market conditions to find optimal entry and exit levels for their trading positions. These types of research help identifying the tendency, determine its strength and momentum in a certain period or timeframe. FinamxFX regularly publishes technical analysis outlooks focusing on several significant assets including trading forecasts for trading possibilities in the market on a weekly basis.

Technical analysis

Indicator analysis

A wide variety of technical indicators was designed to forecast the market conditions and identify trends. These tools can show the trend’s direction, determine volatility, predict price action momentum, define models’ efficiency and point out other parameters. Any trading strategy could be empowered by using different combinations of indicators. Efficiency and profitability of any system depend on accuracy provided by indicators. It’s essential to pick efficient indicator and avoid a glut of technical tools, which might negatively affect the overall result of trading.

FinamxFX trading terminal MetaTrader5 includes a large number of indicators divided by several groups and directions. The catalogue consists of trend indicators, oscillators, cyclical and trading volume tools, etc. Let’s have a look at an example of indicator analysis

Ichimoku Cloud. That’s a technical indicator developed by Japanese traders to predict the price of rice. It’s based on modelling the price action taking into the account several parameters in the history data such as exponential moving averages, comparison of ranges for high and low price levels, trend identification, etc. Although some traders might think that Ichimoku Cloud is applicable for USD/JPY currency pair and other yen crosses, the practise shows that it effectively works with other financial instruments such as GBP/USD, WTI Crude Oil and Gold.

Catch trend

FinmaxFX website contains educational materials and learning tutorials on how to use technical indicators, fundamental analysis and other tools in profitable trading in the foreign exchange market. If you face difficulties with your own research and self-education process, you always can ask FinmaxFX analysts for help and consultations to teach you how to catch a trend and benefit of that.

 

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How to catch a trend FinmaxFX
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