How to Analyze Data for Forex Profitable Trading

by MD Ashik Finance & Economy Analyst
Forex trading is the art of being able to predict when currencies will change in value in relation to one another, and in what direction the shift will take place.

The good news is that the fundamentals are relatively simple; Will the dollar weaken against the yen? Will the pound strengthen against the euro?

Another piece of good news is that there is a large amount of data available to the average retailer to enable them to make this decision. Of course, you can choose to rely on your instincts and make decisions when situations in various currency exchanges open before you.

Although there is a place for quick thinking and quick decision making in Forex trading, this will only be the basis of a stable and successful long-term strategy — a strategy that provides a consistent level of profit — if quick decisions are built on clear and thoughtful foundations through a long-term plan.

And this kind of planning is only possible if you know exactly what data to look for, and about the tools available for assistance in your analysis.

The complexity of big data in the era of digital communication is smooth in such a way that it is impossible to summarize every possible metric or analytical approach that can be accessed by retail traders in the available space.

What is possible, however, is an overview of the main data analysis boards that traders need to keep in mind, and look at several types of tools that can make that analysis easier and more accurate.

Forex Fundamentals

When a trader buys and sells a stock, the analysis needed is focused, primarily, on the good health of the company concerned, and whether various indicators predict that the stock is likely to rise or decrease in value.

Broader market conditions certainly have an impact, but these conditions will be the same for every stock traded, which places a strong emphasis on stock choices.

However, related to Forex trading, the fundamental problem will always be the relative strengths and weaknesses of a currency pair.

Looking ahead in an effort to take advantage of value shifts means analyzing macro-economic numbers such as interest rates, unemployment rates, and GDP (gross domestic product).

Many of these numbers are strongly improved in the economic news cycle, which means it is easy for a trader to see ahead of time when a country or block like the European Union is likely to announce numbers that might have an impact on currency fluctuations (predict what this impact will be a more complex problem altogether, of course).

On the other hand, requiring more vigilance to be considered is a sudden change that might be triggered by an event such as a comment at a ministerial-level press conference which is assumed to increase Brexit opportunities without agreement and thus send the value of the pound to fall.

Fundamental analysis based on a one-time event like this requires special attention to detail, up to minutes (or even seconds) access to news feeds, and willingness to take positions instantly.


Technical analysis is not based on real-world events outside the bounds of currency exchange, but on an in-depth analysis of how currency prices have moved in the past.

By focusing on charts of price movements and analyzing them with various tools — both manual and automatic — a trader can identify patterns that have been repeated in the past and can be expected to repeat again in the future.

Past performance is not a guarantee of future success, of course (some cliches become cliches because they are true), but the relative stability of major currencies, in the long run, means that patterns of movement can be relatively predictable.

Market Movements

A further method for analyzing the foreign exchange market is to pay attention to a larger than usual shift in the number of traders investing in a certain currency.

As soon as a large number of traders invest in a certain currency, the group of people in the future who may choose to sell the currency expands, with the result that the potential value of the currency is affected. Analyzing market movements can be referred to as being at the discretion of many people.

As has been shown in the past, that wisdom is often wrong. The invasion of buying or selling a particular currency can be triggered by knowledge of where the value of the currency is headed, but that can also be caused by a self-fulfilling simple forecast — sometimes, if enough traders take positions, quite a number of other traders assume must there are good reasons for doing it and following it, creating patterns that feed themselves with little or no external justification.

Not a question which of these three modes of analysis is the most effective, because the best results will always be obtained by combining all three elements. However, the flood of available data, especially those relating to technical analysis, means that wiser traders will use some of the available tools:

Highlighter session

One of the main attractions of Forex trading is the fact that the currency market is open somewhere in the world 24 hours a day all week. The fact that different markets open at different times of the day mean that sessions in that market tend to have different effects on the currency pair that the trader is working with.

The session highlighting tool can be used to divide the trader chart into these various sessions, and then to highlight any movement that occurs during a specified period, such as one minute, number of minutes, or a certain hour.

Volatility Tool for Forex

The volatility tool will show the trader how much, and in what way, a pair of currencies has moved every hour for a period like the last thirty days. This allows traders to build a more complete picture of how currency pairs behave and record patterns such as repetitive movements on certain days or at certain times of the day.

A more advanced version of this tool will calculate a typical range of movement and, given a period of time by a trader, will display the percentage probability that the pair will remain within the specified range.

Signal service

Signal service providers offer instant information in the form of tips, delivered either by experts or AI systems, which recommend trading at certain times and prices based on the analysis.

There are various types of Forex signal services available, some based on fundamental analysis (ie news that might have an impact on the market) and some on technical analysis.

Signals should not be confused with the types of AI that are traded automatically on your behalf — they only provide timely information that is up to you, as a trader, to interpret.

Conducting and applying analysis is the main practice of every successful trader. The level of analysis conducted by traders will depend on their inclinations and tastes for hard numbers, but the rule to remember is that while there really isn't such a thing as too much analysis (as long as it's used to finally take a position), too few concepts of analysis are too real.

So, in the end, if you want to be profitable in Forex online trading then you have to analyze a few things and I've highlighted a few ways that you can apply to your analysis. And if you have any topics in mind that you want me to cover for you then please let me know.

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About MD Ashik Innovator   Finance & Economy Analyst

29 connections, 0 recommendations, 90 honor points.
Joined APSense since, June 23rd, 2019, From Khulna, Bangladesh.

Created on Jun 10th 2020 12:44. Viewed 262 times.


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