It is every forex trader’s dream to find the perfect foreign exchange rate prediction method. This would ensure that they make massive profits in this trading market. This is a complicated market where you need to gain sufficient experience to trade. Along with the experience, you need to be able to undertake various analysis methods to allow you to make fairly accurate rate predictions. Traders and brokers spend a lot of time doing predictions on a daily with the use of various tools. Some of these work and others do not. There are two popular methods used by traders. It appears that the best method is a combination of these two.
Using Technical Analysis
This method makes use of historical data to make a forecast for the future. This has been found to be effective because humans normally react in the same manner to similar situations. The theory is effective in the forex market due to human interaction. It is viewed as a safe method to use for predictions, although it is not always as accurate as it should be.
Using Fundamental Analysis for Prediction of the Foreign Exchange Rate
This is a more detailed analysis than the technical method. It makes use of the same type of information, but uses it in a different fashion, hence the level of accuracy of this method is very similar to the technical method. Fundamental analysis focuses more on the larger events in a country, such as political events, economic policies, and socio-economic events and policies. It also takes into account the intervention of governments in their attempts to stabilise the foreign exchange rate. This method can be used to determine if the foreign exchange market will experience a decline due to a country’s instability. It can be used to predict how the market will be affected by the election of a new leader who has the support of the citizens. The bottom line here is that this method allows you to use the effect of any event in a country to make predictions regarding its currency rate.
Many traders have successfully used this method of calculation. It is an extremely time consuming and involved method as you need to keep up to date with so many news releases and the amount of data is huge. Most traders cannot allocate this amount of time to research. This has been the reason for the introduction of software to aid traders in making use of all the available information. The software uses the relevant data to produce sufficient information to allow a trader to place effective trades. This could relieve you of the time it would take to do the necessary analysis.
Many traders believe that the use of both fundamental and technical analysis is the best route to use. This appears to be the ideal, but, once again, you need the time to do all the necessary research and analyse the data.
It is not a simple task to undertake foreign exchange rate predictions. There are various methods you can use to do this task, but you need to know how to do the analysis and have sufficient time for research. You could consider obtaining suitable software to provide you with sufficient information to enter your trades.