Forex encyclopedia

Usually traders use two types of analysis in Forex – technical and fundamental. The first one involves chart analysis with application of mathematical methods and principles. Fundamental Analysis in Forex implies monitoring of political and economic indicators as well as monetary policy of countries. The main difference between the methods is the approach to the creation of price on the chart. Traders who prefer technical analysis think that it is enough to analyse the actual prices, because this data already includes all indications and reasons of change. However, followers of fundamental approach state that prices depend on fundamental factors and mark relationship between demand and supply. Thus, using technical approach traders analyse prices and relying on fundamental approach they deal with analysis of the trading instrument. Fundamental analysis in Forex examines political, economic, macro- and micro indicators not only for individual countries, but for global environment also.
The market price of each movement in a certain period of time can be represented in the form of candles, possessing the opening, closing, high and low prices. Appearing one after another, Japanese candlesticks show traders information about the market movement. But as it is well known, analysis of Japanese candlesticks is subjective and even the brightest candle patterns are not always triggered with absolute precision. Therefore, analysis of individual candles and their combinations has some features. 1. The place where candle pattern occur The first in the such feature of this type of analysis is the o place where candle pattern occur on chart. Prior to opening a position, you should carefully study the market situation that preceded appearance of combination of candles. For example, the pattern "dark cloud" that emerged near the strong resistance level, should be interpreted more as a reversal pattern rather than "bearish" absorption showed outside the scope of resistance. The same way, formation of "doji" after a prolonged trend is a much more significant model than if a candle occurs on a flat market.
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Forex encyclopedia
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