Welcome to our Free Course
Enhance your trading knowledge by studying our legendary free online program!
  • Beginner
  • Intermediate
  • Advanced
  • Completion
  1. Beginner
    Early Stages for Beginners
    8 Topics
  2. Forex Terminology
    11 Topics
  3. Margin & Leverage
    2 Topics
  4. Personal Psychology Questions
    2 Topics
  5. Psychology for Beginners
    7 Topics
  6. Intermediate
    Identifying Scams
    2 Topics
  7. Brokers for Beginners
    5 Topics
  8. Technical Analysis
    13 Topics
  9. Market Structure
    5 Topics
  10. Completion
    Risk Management for Beginners
    8 Topics
  11. Fundamental Analysis
    9 Topics
  12. Advanced
    Using Indicators
    6 Topics
  13. Technical Analysis (Part 2)
    8 Topics

3 Types of Analysis (Technical, Fundamental, Sentiment)

Now when it comes to the market, there are three different ways to analyze the market and form a bias: Technical, Fundamental, and Sentiment Analysis. Technical analysis helps us remember areas that price was affected by in the past via chart patterns. In doing this, it helps us visualize the overall sentiment of the market, which is affected by fundamental factors. This is where we really start to dive deep on how the market works. One is never deemed more important than the other, although a lot of traders pride themselves on ignoring fundamentals and referring to themselves as technical traders; however, you need to fully understand how all three work together, as they go hand in hand.

Technical Analysis

Technical Analysis is how we study a currency’s price movement based on what it did in the past. Basically, it’s everything you look at when viewing a chart, including: candlesticks, market patterns, trendlines, and so on! (We’ll dive deeper into them in the technical analysis section). With this type of analysis, you can look at the current market conditions, and based on previous price movements (last week/last month/last year), it can allow you as a trader to determine what direction price may be headed towards.

Fundamental Analysis

Fundamentals are a little more tricky than Technicals. They are completely driven by politics, and have everything to do with how a country’s economy is doing. This is probably THE ONE section that new traders feel they don’t need to worry about, which is completely FALSE. Fundamentals play a HUGE role in market direction, which is why as traders, it’s important to stay up to date with what’s going on in the world. Yes, I know for many, news can be quite boring, but sometimes, you just have to suck it up, especially if you want to understand this market and potentially be successful within it.

Essentially, strong Fundamentals would mean price will be pushed in a certain direction depending on what news announcement just came out. If a country’s economy is good, its currency is higher in value. Oftentimes, you will notice price struggling to break through a key level (support/resistance), which in turn could mean it is waiting on a Fundamental announcement to break that barrier. The goal is to find trades where the Technicals reveal exactly what the news is saying or for the Technicals to show a preview by slowly starting to head in a certain direction. While this happens, the Fundamentals only pushes it further.

The market is SUPER volatile when news comes out. For example:

Price may be on the news the first Friday of every month (NFP) at 8:30. Traders across the world know the spread of all pairs will be widened and the market will fluctuate both ways before heading in an overall direction. Trying to trade the news can be very scary because you never REALLY know where price is heading. If you trade on a regular day that doesn’t involve the news, even though you STILL never really know where it’s going, you can be confident that price won’t suddenly jump 100 pips in 5 minutes. With news, that exact thing can happen. It can bring quick and large gains but it can also bring quick and large losses.

Sentiment Analysis

SENTIMENT analysis has everything to do with how YOU, all the other traders, the analysts, and social media are FEELING.

Unfortunately, as retail traders, it really doesn’t matter what our thoughts or opinions are, as the market will always do what it wants. Our goal is to interpret what the market is presenting to us. You could say the market always finds a way to humble you at some point or another. Things won’t always move in our favor, which is why we need to make sure we incorporate all three analyses in our trading.