Lesson 1: The Different types of Analysis

There are many things I want you to understand and to teach you over the coming days and weeks. But before I go into details on them I feel it is important to clarify for all of you what the different types of analysis are. I feel that it is important to understand these as it is the basis of making any judgement before entering the markets. If you want to outperform the market, you need to know what you are doing. If you want to enter just blind and take silly gambles then go to a casino.

I feel that I should teach you first what the two different types of analysis are and then proceed to teach you how to do each one.

So you have two types of analysis you have technical analysis and fundamental analysis:

Technical analysis is about understanding where the money moves in the market at a given point. It means realising that on a given date e.g. 1 October 2015, for the currency pair in question that at level X you have people waiting to buy and at level Y you have people waiting to sell. The way that you can determine this is often through thorough analysis of graphs and charts and by looking at the option monitors to see where larger institutions have purchased the right to exercise an option. This can help you understand quick movements in the market as you can realise that a certain level many people have jumped on board to buy a pair or sell a pair. That’s about as simple as I can make its explanation and hope that clears up for everyone the importance of technical analysis and what precisely it is.

Fundamental analysis is the second type and it involves understanding why the market moves the way that it does. It is data driven and data dependent and is determined by economic releases, monetary policy and external events in the environment (News and events) and unforeseen circumstances. In the long trend this is generally the more important of the two methods in determining the direction of a currency pair.

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