Before answering the question why should a trader need to do analysis like fundamental analysis, technical analysis, etc. before trading, it is important to know about the various methods of analysis. There are various types of analysis that are being used in Forex trading. These are being used by trader to determine whether to buy or sell a currency pair at any one time.
Traders who have gained confidence using Forex analysis tool recommend that fundamental and technical analysis, both are important and one cannot be useful without the other. Traders use charting tools, economic indicators, news based events and trends, etc. to do Forex analysis and make decisions on that; they often are successful. However, it is also important that what works for Jake may not work for John.
Fundamental Analysis – Traders who use fundamental analysis claim that with it they are able to analyze changes in the forex market by monitoring factors like interest rates, unemployment rates, gross domestic product (GDP), etc. These are some factors that have traditionally been used by Forex traders to predict the natural outcome; however, there are some subtle factors that are left behind and that is where technical analysis comes to role.
Technical Analysis – Now, when it comes to technical analysis, there are two systems for the purpose e.g. manual and second automated. Each of the two has different features; however, serve the same purpose. Traders believe that automated is quite useful for it is not touched by human emotions; however, it has its own critics who claim that with manual, a human touch helps to determine the sentiments of the Forex market.
Traders claim that technical analysis that uses automation in fact uses past price movement to determine where a given currency may be headed and that is the best use of technology i.e. gets the unbiased prediction. Advocates of automated systems for technical analysis admit that with it traders can benefit a lot as many traders lose due to emotional association which is ruled out here.
Why you need to do analysis before trading Forex: It helps you make informed decisions. Traders who prefer both automated technical analysis and manual trading strategies should know that this software is available to purchase over the internet. Depending upon orientation, a customer can buy them to further Forex trading.