What is the Forex Market?

The foreign exchange market refers to the place where currencies are traded. Either consciously or unconsciously currencies are of high importance to most people worldwide, because they are needed in conducting foreign exchange and business. For example, when buying something from a country with a different currency than yours, it means that there must be an exchange made equivalent to that currency. The same happens when travelling and when you need to exchange money into the target currency.
What makes this market unique is that there is not a central marketplace for foreign exchange. On the contrary, forex trading happens online, over-the-counter (OTC) meaning that all transactions occur electronically among traders globally rather than on one centralised exchange. Of equal importance is the fact that the market is open 24 hours a day, five and a half days a week, while currencies are traded in the major financial centres of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney, in different time zones. As a result, when someone stops trading in the US, another one starts in Japan. For this reason, the forex market is extremely active at any time of the day and volatile as prices constantly change.

How to Read the Forex Market

Market Analysis refers to both Fundamental and Technical Analysis. Most traders believe that Market Analysis is just Technical Analysis while the latter only refers to looking at the charts and various indicators which are helpful in assessing the market instead of prices as such.

Fundamental analysis includes analysing central banks’ decisions and monetary policy and economic data as well as understanding them. Unfortunately, many traders are not aware of these, so they usually skip them. This is the main reason behind a possible failure and the reason why trading is not successful for them in the long-term.

التحليل الأساسي

The most important thing to know about Fundamental is analysis is that how currencies will move will completely be determined by the Fundamentals. There are three major components to fundamental analysis: Central Banks, Economic Data & Geopolitical events. You should closely look at the first two, which can be quantified, while the third is almost immeasurable and even random sometimes.

• Central Banks are the starting point. Their policy targets and protocols are pretty clear to follow. Therefore, speculating on what they might do or say and when they are going to say or do it is very easy. Their main responsibility is to apply Monetary Policy, which is based on the clear measure of Inflation and Employment.
• There are 3/4 key Economic Data the Central Banks focus on very closely. If something changes regarding this data it means that the market will change too because there might be a shift in interest rates should the numbers be consistently strong or weak.
• Events like Geopolitics are random and usually avoided rather than traded. They usually cause confusion and change the natural flow of currencies.

All you need to know is that banks are the market, controlling over 90% of the volume. Entering and exiting the market using trendlines. Once you have a clear understanding of this you shouldn’t worry about anything else.

التحليل الفني

The technical charts are the means to providing a clear picture of where the currency pairs are moving. Technical Analysis is an extremely important part of Market Analysis because it clearly illustrates where to enter and exit the market. It also shows any possible trends currently available in the market. If it has been a while since you were last active, you can take a look at your charts and find out if it is in an uptrend or downtrend.

All you need to know is that banks are the market, controlling over 90% of the volume. Entering and exiting the market using trendlines. Once you have a clear understanding of this you shouldn’t worry about anything else.

Professional Market Analysis

When analysing the market you need to pay particular attention to both sides of the market. Bringing Fundamental and Technical Analysis together would be ideal. Isolating direction and entry levels will also improve your trading potential. 3 major things to ‘analyse’:

• Central Bank News and Sentiment
• Key Economic Data Release and Market Sentiment
• Technical charts and Overall Sentiment

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