How to Predict Forex Rates

Predicting Forex Rates

When attempting to predict forex rates you will need to conduct an in-depth analysis of the foreign exchange market.  If you do not complete this analysis then you will not be able to predict forex rates accurately.  With the continuously changing forex market it is recommended you have some experience in analysis to obtain the best predications.  However, it should be noted that even the most experienced traders can have difficulty when predicting rates.  There are various forex trading tools and strategies that traders use to predict market movements.  The majority of traders who are unsuccessful in using these tools and conducting predictions are often those looking to earn money quickly on the market.

Prediction of forex rates can be done in two ways, through technical analysis and through fundamental analysis.  There are traders who choose to combine the two methods as they can benefit each other when used correctly.

Fundamental analysis and forex rates

Fundamental analysis can be viewed as a more in-depth means of predicting forex rates.  This type of analysis examines how the foreign exchange market is influenced by different economic, social and political happenings in different countries worldwide.  It uses forex news releases as a basis for its analysis and further trading tools as indicators as to which items are most influential.  There are various trading systems and strategies that use fundamental analysis exclusively to determine when and on which currencies to trade.

One of the greatest drawbacks of fundamental trading among retail traders is that they are unable to access the news before it reaches the forex market.  In order to make a large profit with this analysis you should technically place the trade before market movement.  Fundamental strategies are most suited to financial institutions as they can access the news before it is released to the general public.  This means they can place their trades first and gain the greatest profit.

Technical analysis and forex rates

Technical analysis is more commonly used by retail traders.  This type of analysis looks at historic information of the market to determine any future movements.  Generally, this method is effective with all currency pairs; however, the success of the analysis is based on the trader’s level of experience in the market and their interpretation of the data. There are various trading tools an individual can use when utilising technical analysis.  The most effective are forex charts and forex signals.

Technical v. Fundamental

It can be very difficult to determine which method is best to use when trading.  Evidence shows that a combination of both is the most effective.  Each method has certain aspects which can be combined to develop a profitable prediction strategy.  The majority of successful traders use this technical/fundamental combination leading to a reduction in losses.  However, the use of this mixture should be based on personal preference.  It is important you find a trading style and using a method of analysis that suits your personality.

 

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