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Determining the Best Types of Forex Analysis

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Determining the Best Types of Forex Analysis

PostTue Nov 20, 2018 3:42 am

Determining the Best Types of Forex Analysis
Between fundamental, technical, and market sentiment analysis, which is the best type of forex analysis to use? Questions like this often cross the minds of beginner traders. They assume if the "flow" of traders can be divided based on the type of analysis used, without really understanding that 3 types of forex analysis are not conflicting, but rather complementary.
Fundamentals form sentiments, while technical help visualize those sentiments and apply a framework to create a trading plan. Therefore, it is quite impossible to use only one type of analysis in forex trading. Don't believe?
1. If you only use technical analysis, then you will only pay attention to the movement of GBP / USD on the chart without taking into account other factors. Let's say you find a very good Buy trading opportunity based on technical signals, then install a Buy Order with great confidence that the price will move according to the technical projection. However, what happens when the Bank of England announces a sudden cut in interest rates?
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The market will panic and sell the GBP / USD that you bought. So, even if technical signals can help predict where the next price movement will go, this type of analysis will not be able to overcome the fundamental impact that appears unexpectedly and can move prices significantly. In a situation like this, traders who do not ignore the fundamentals will choose not to order, or just enter the market after the announcement of the central bank.

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