Forex market serves investors as the financial market with today’s largest transaction volume. Trading on the Forex market is done in non-physical forms. Through non-physical buying and selling transactions, transactions are carried out without any risks such as protection, security, storage, and stealing.
The fluctuations in the prices of investment instruments in non-physical buying and selling transactions must be estimated in advance. For this reason, the forex analysis should be well understood, correctly implemented and interpreted.
There are two types of analysis in Forex market, technical and basic analysis. We will examine the technical and basic analysis in detail in this article.
Forex Technical Analysis and Comments
Technical analyses, also known as mathematical analysis, are among the Forex market analysis, allowing the forecasting of price trends of investment instruments. By using technical analysis tools trend trends are detected in the market and the range of transaction orders is determined.
Technical analysis has many tools that allow reading price graphs. For this reason, the price charts must first be known. There are 3 basic price graphs that are used in Forex market in general. These are candle charts, line charts, and bar charts. The most commonly used chart type is candlestick charts. The candlestick charts showing detailed information on the investor show the direction of the price, the opening price, the closing price, the highest and lowest prices. At the same time, the time slice of each candlestick indicates the selected time in the time table.
Bar graphics are simplified versions of candle charts. Bar graphics analysts who are not very much preferred; The direction of the price, the opening – closing price, the highest and lowest prices. The bar graph on the left of the bar shows the opening price, and the line on the right shows the closing price. Accordingly, the direction of the price is determined. Line charts are the simplest type of chart. It is generally drawn over the closing price, and the analyst is only giving a single piece of information.
There are many technical analysis methods. To examine these types of analysis briefly;
Dow Theory (Trends)
The Dow Theory, developed by Charles Dow, known as the founder of modern technical analysis, provides information on the price trend of the analyst investment vehicle. The most commonly used method of technical analysis.
The Dow Theory consists of three main trends. These;
- Main trend (long term trend)
- Secondary trend (medium term trend)
- Minor trend (short-term trend)
The main trend is the trend that the price of an investment vehicle shows for a year or more. In short, it shows that the investment vehicle tends to dominate over a period of one year. Investors planning to achieve long-term earnings need to pinpoint the main trend. The secondary trend refers to the trend shown in 1 to 3 months. To understand that the resulting trend is a secondary trend, it is necessary to follow a reverse trend of about 50% of the highest and lowest prices.
The trend which represents 1 day and 3 weeks is the minor trend. Given the momentum in the Forex market, this trend is heavier in the forex market than in other markets.
Support and Resistance Points
One of the other important concepts of technical analysis is support and resistance points. Every investor who wants to succeed in the Forex market needs to know these two basic points. The point of support is that the price of the investment vehicle has difficulty to go below a certain level. The resistance point is the opposite of the support point, which means that it is difficult to reach a certain price level.
As the price approaches the point of support, sales will decrease while purchases will start to increase. For this reason, demand will pass and the price will start to rise. As you approach the resistance point, as purchases decrease, sales will start to increase and prices will start to fall. In some cases, the support or resistance point can be broken and this is called a breakout.
It is a technical analysis developed by John Bollinger. Bollinger bands are obtained by shifting the moving averages up and down to the standard deviation value. Moving averages are one of the most reliable methods of analysis and by adding a standard deviation value it is possible to achieve safe results in the short term by minimizing the error margin.
When drawing Bollinger bands, the default period value for the moving average is 20 and the standard deviation value is 2. If the period is chosen longer, the value is increased to ensure reliability because the standard deviation rate will be higher. Bands can be used to identify short-term peak and dip points in the trend. At this point, successful positions can be captured on the forex market.
Fibonacci analyses are evaluated as the most interesting of the technical analyses. Fibonacci numbers developed by the Italian mathematician Leonardo Fibonacci and an analysis method on the concepts of the golden ratio. Almost all of the technical analysts are interested in Fibonacci’s mathematical concepts. The basic logic is; Nature is in a certain order and has a mathematical structure.
The analysis is based on Fibonacci numbers. The first number in this sequence is zero, and the numbers that follow are the sum of the previous one. That is, F0 = 0, F1 = 1, F2 = 1 + 0, F3 = 1 + 1, F4 = 1 + 2, … , Fn = F (n-1) + F (n-2). The points attracting attention in this issue are; Each third number is divisible by 2, each fourth number by 5, every sixth number by 8. In the Fibonacci number sequence, the multiplication of a number by a number (1,618) gives the next number. As numbers grow, the approach rate increases.
In addition to determining the market trend, trend power is also of great importance. After the trend has been determined, transactions can be successfully performed without being adversely affected by trends that are regarded as lie trends. Momentum graphs are also a method of technical analysis used to determine the power of this trend.
Momentum graph calculation;
Momentum graph values = closing value in the last period/closing values in the specified time period are made with the formula of x 100.
Momentum is interpreted as a critical level of 100 in the interpretation of the graphics. If the level of 100 is exceeded, the demand for trading is high and for this reason, it is understood that the trend will be strong. When it is below 100, it is understood that the demand for processing is low, and the trend generated by this reason will be weak.
It is one of the analyses used to identify trend formations. In addition, it also allows observation of excessive trading signals. With the Stochastic Oscillator, trend change points can be determined and signals related to high price changes can be obtained.
The Stokes Oscillator has two graphs, called% K and% D. Calculation of these values;
% K = 100 x (Last Closing Value – Lowest Value) / (Highest Value – Lowest Value)
% D =% K is obtained by taking the moving average of the graph.
Various interpretations are made according to the intersection points of the %K and %D graphs. If the %K graph shows a %D graph cut from the bottom up, it is understood that the price of the investment vehicle will rise. In the case where the %K graph cuts the graph of %D from above, it is understood that the price of the investment vehicle will fall into the trend of decrease.
In the case of using for the purchase of excess buying – selling signals; The upper and lower threshold values must be determined depending on the trading strategy used by the investor. Generally used upper and lower threshold values are 20 and 80 values. Overtake in the market in case of the passage of 80, and over-selling in the case of lowering below 20 value.
Relative Strength Index (RSI)
RSI teknik analiz indikatörü de, aşırı alım – satım sinyallerinin belirlenmesinde kullanılmaktadır. Teorik olarak yatırım araçlarının fiyatlarının optimum fiyat seviyelerine ulaşma eğiliminde olduğundan bahsedilmektedir. Bu nedenle de piyasa aşırı alım durumunda yatırım aracının bir düşüş trendine, aşırı satış durumunda yükseliş trendine girebileceği yorumu yapılmaktadır.
The calculation of the RSI value is;
RS = averages of rising price movements/averages of falling price movements
RSI = 100 – (100/1 + RS).
The RSI indicator has two levels, the lower and upper threshold points. In general, the upper and lower thresholds are used as 30 and 70 levels. It is commented that if the price falls below the level of 30, over-selling will occur and if over 70 level, over-purchase may occur.
Moving Average Graphs
It is considered as the most used technical analysis tool. Moving average charts can determine trends that can occur in the market. In this way, accurate trading positions can be easily captured and high profits can be obtained.
Interpretation of moving average charts and signal acquisition is simpler than other methods. The rising trend in the case where the moving average graph cuts the graph of the investment instrument from above; It is accepted that a downward trend may occur even in the case of downward slanting.
There are 4 different moving average charts;
Simple Moving Average Graphs
Graphs are given importance at the same time to all closing values within a specified period. Calculation:
Simple Moving Average Graphs = Closing prices aggregate value / Set time interval
Exponential Moving Average Graphs
It is accepted that the tendency of investment instruments to reach the latest price levels is considered to be higher. For this reason, comments are made based on recent closing values in exponential moving average graphs.
Variable Moving Average Graphs
It is used by analysts who want to get detailed results. It is aimed to determine the trend formations of investment vehicles moving especially within a certain band interval in the variable moving average graphs.
Weighted Moving Average Graphs
Recent closing values are more important than other moving average graphical values.
Despite the fact that there are many more technical analysis methods, we chose to tell you the most used methods briefly. At the beginning of the issues that investors should pay attention to when using technical analysis tools, they are to determine the analysis method that is appropriate to their own investment strategies. Technical analysis tools are able to give different signals in different time periods on the market. For this reason, the use of the analysis method that the investor will determine in accordance with its own strategy will increase the accuracy of the information received from the signals.
Forex Fundamental Analyzes and Comments
Basic analyzes in financial markets include financial statements, management, competition conditions, sector and company analysis. Interest rates include topics such as inflation, which provide first-rate information about the economy of an economy. These concepts, which are known as macroeconomic data, should be constantly monitored and the issues such as explanations, speeches and central bank interventions that are particularly effective on foreign currencies should be monitored.
The basic analyzes are generally grouped into three groups as economic analysis, sector analysis and company analysis. Company and sector analysis are the types of analysis that often affect the stock market and stock market investors. At the same time, the basic analysis has three basic macroeconomic factors. These are; Interest rates, unemployment rates and inflation – political events.
When the factors affecting the economy of an country are examined; Changes in macroeconomic data, political and economic turmoil in the country, war and conflict between countries, natural disasters. In short, basic analyses are interpreted to analyze how investment instruments will affect prices. In order to be able to obtain definite results, it is necessary to be interpreted together with the results from the technical analysis.
The economic calendar concept, developed for the purpose of explaining macroeconomic data, constitutes the most important instrument of the main analysts. The positive announcement given by macroeconomics shows that the country’s economy has improved in the positive direction. Negative data directly affects foreign exchange, but the country’s economy is adversely affected. The economic calendar is here.
If we are going to define a few important macroeconomic benefits;
Interest rates are influential on the supply of money in the market and serve as scales. As you know, if the money supply changes in any way, it will certainly change in value. For the sake of the country’s economy, interest rates also have a big precaution. The authority to change interest rates belongs to central banks. The reasons for doing this are to maintain price stability in the country.
There is a direct correlation between the interest rates and the value of the money. When the decline in interest rates occurs, the value of money will also decline. When the interest rates increase, people start to demand the country’s currencies and the currency gains value along with the demand increase. By following basic analysis on the Forex market, you can significantly reduce your investment risk. When the interest rates are raised, you will know that the value of money will rise and vice versa. Particularly if you are trading with partels, you should closely monitor the factors that influence currency value.
As a condition that indicates a continuous increase in the general level of prices, it means that the nominal national income increases with the amount of goods purchased with this income. The opposite of inflation is deflationary. Prices represent a monetary surplus of a particular good or service in a country-level economy. These prices are based on the balance between goods and services and the amount of money in circulation. If the increase in money circulation is balanced by the increase in goods and services, the general level of prices does not change.
Inflation affects the flow of economic activity. With the increase of inflation, the rich will be richer, the poorer will be poorer. Purchasing power will weaken, social unrest will be experienced. Profits earned from speculations will increase. It is also known that inflation generally affects people with a narrow and fixed income.
With the increase in inflation, the worthwhile money is extracted and invested. As the demand for labor increases, the value of the money declines rapidly. Increasing inflation is an advantage for borrowers. They will pay their debts more easily because the value of the money falls.
Non-Farm Employment Change
A report giving information about the employment situation of all people working outside the agricultural sector. It is an important criterion in the US that has the ability to determine dollar direction. It shows that the economy is progressing healthily. The high rate of non-agricultural employment data indicates that the US dollar will be affected positively.
It is one of the indicators that best reflects the current economic situation of the country. 60 thousand households and 375 thousand enterprises. The usual rate of unemployment for a country’s economy is usually between 4 and 5%. To give an example over American dollars; The low unemployment rate will cause the US dollar to strengthen.
Gross domestic product
It represents the market value of goods and services produced within a period. It provides information on whether an economy of an individual country is growing or stagnating. Positive developments help increase the value of money.
Other important macroeconomic variables in the forex analysis are retail sales, industrial production, housing starts, manufacturing index, consumer price index (CPI), producer price index (PPI), durable goods index.
It is generally expressed by economists as the concept of pricing of developments. Political developments in a country, political tensions between countries also affect the value of the currency. Human behaviors and the way in which events are perceived are one of the main factors affecting the value of the currency. Political developments also have an impact on the currency because these two factors are connected.
All political developments are speculative sources that will change the direction of money. Though not actually affecting the value of the currency that appears, living events and human behavior will cause changes in the value of the currency to come to fruition. So market developments will price.
Where can be Forex Analyses Tracked?
Correct application and interpretation of Forex analysis is vital to success in your investment. Technical and basic analysis will be applied correctly and then interpreted together will ensure correct buying and selling decisions for the future. But as we mentioned earlier, these analyzes should be chosen appropriately in your investment strategies.
Services offered by Forex companies include daily, weekly and monthly analysis reports. It is possible to use the analysis service of the intermediary institution that you are a customer free of charge. At the same time, forex transactions can be carried out over the internet at any time and place, such as 5/24 via internet. Both basic analyzes and technical analyzes can be tracked in detail through brokerage websites.
You can also access forex analysis on our site. Whether it is done by expert analysts at the brokerage houses or at the beginning of the issues you need to be aware of, you are also implementing and interpreting your own analyzes. It may not be very beneficial for you to create positions by merely taking advantage of the analysis of brokerage houses. For this reason, you can benefit from both the analysis service and the training service, and you can also learn how to apply the analysis.
You can decide which forex firm you will agree with for information about services such as analysis and training of the intermediary institution you have agreed on for your investment transactions. Instead of being blinded to the analysis, you can find your common point by doing your own analysis. You can perform safer transactions on this number.