A comprehensive guide on currency analysis in the field of forexadmin1 - October 7, 2021
A comprehensive guide on currency analysis in the field of forex
In this topic, we will learn in detail about currency analysis, or as it is called forex analysis. We will try to give you all the necessary information to have a comprehensive overview and prior knowledge of these techniques before you start applying them as a beginner trader.
What is forex or currency analysis?
Currency trading is the field of forex trading idiomatically, which means buying and selling currencies in exchange for profits in the difference between the purchase price and the selling price. But before we talk about technical analysis of currencies, we must first talk about some of the buying and selling mechanisms in the forex system, and to have a clear and deeper insight into currency analysis or forex analysis.
The currency trading system works by monitoring prices and buying and selling execution through the famous trading program or platform (MetaTrader), as we mentioned earlier, a platform that allows each trader to monitor more than 100 currency pairs at least, in addition to the prices of commodities such as gold, oil and many other financial instruments.
We talked about this in the above in this article: The 26 most important terms in the world of forex trading.
It also allows the trader to make a buy or sell deal as the trader wishes and according to the size and type of the deal he wants, using the mechanisms and help of indicators and technical analysis tools available in the MetaTrader program, which we will talk about in detail later, which allows the trader to explore the current and expected price behavior to determine the process Buying or selling through the available technical tools.
The trading system in the forex market, analysis and currency trading is based on the purchase of one pair against the sale of another pair. Let us give an example to make the vision clearer: Suppose we have a currency pair of the euro against the dollar, and the base currency is the one that writes the first, thus EUR/USD.
Suppose, after the process of analyzing currencies or forex, you found that buying is in your favor, When we want to buy, the purchase is for the euro against the dollar, i.e You are buying the first currency for the second currency.
In our example, we buy the first currency, which is the euro, against the second currency, which is the dollar. If the price of the euro is 1.2250 dollars, in order to make a profit, we need to sell at a higher price than this price in order to make a profit. For example, if the sale took place after the price rose to 1.2300, the price would have risen by 50 points You won 50 points, and if we assume that we made a deal with a size of 10 dollars per transaction, then every point you earn is equal to 10 dollars in profit.
The total profit is as follows:
The contract size is $10 multiplied by the number of profit points, which is 50 points. So the total profit is simply $500. And in order to make the matter clearer, you must know, my beginner friend, that the market has three directions, and it does not have a fourth, which is, up trend, down trend, Sideways or as it is called sideways.
If you expect that the price will rise, you are buying to realize the difference in the price of buying and selling, But if you think that the price may go down, you can sell first and then close the deal on a profit difference between the selling price and closing the deal, so there will be a profit.
I know, my novice brother, that you say to yourself, How do I sell before I buy? Here is the information, my beginner friend. The forex market is the only market in which you can profit from both directions either Buying or selling.
Example of profit from buying or selling in the field of forex trading:
Come let’s take the same first example on the EUR/USD pair to be the closest to understanding.
Suppose that the price is now 1.2250 and you expect according to your data and analysis tools that we will get to know shortly that the price will fall, you can make a sale deal first and then close the deal when you achieve the profit you want, let’s assume here that you made a sale deal and chose the contract size of 10 dollars and The price fell 100 points, meaning the price reached 1.2150. You can close the deal at a profit of 100 points, so your profit, as we have already explained, is the result of multiplying the number of points achieved by the size of the contract or 10 dollars per lot.
That is, the total profit is 1000 dollars, so simply, and this is one of the advantages of forex that it makes you profit in both directions, buying and selling or buying and then selling, unlike the stock market, you buy to sell only.
This is how we explained the execution mechanisms of the buying and selling process and the execution of orders, but there remains an important part that we will refer to here before we talk about it in more detail, which is the technical analysis of currencies and its fields and types.
Fundamental analysis and technical analysis
There are types of technical analysis, we will mention them here only two types with some definition.
1- Fundamental analysis
It is a science and a tool used to analyze supply and demand and study it through the economy and the force that affects it with all the rationales and reasons, meaning that in order for us to have a strong currency there must be a strong economy and if there is a strong economy then there is a strong currency.
In other words, the basic analysis is the study and analysis of the currency through the economic factors that affect it, such as economic reports, decisions of the central bank, the source of the currency, the declared interest decisions, the size of unemployment, the rate of inflation and other factors.
It is the science of studying price movement and everything that affects it through charts and graphs and predicting the price movement based on these data. Looking at charts and technical analysis tools you can learn about trends and patterns that can help you find good trading opportunities that make your trades profitable and successful.
There are many other types of analysis that we will get to know later, but these two types of technical analysis of currencies are the most famous of all, and each type is lovers and professionals, and one of them does not prevail over the other, each of them has time and strategies, and the goal in the end and the goal is profit, dear beginner trader.
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