Researching market conditions before placing trades is an absolute must. Without analysing markets based on an economic calendar, you’ll be trading blindly. You’ll have no idea about current trends or new developments. Basing your trade decisions on assumptions is a recipe for heavy losses. That’s why successful traders spend considerable time combing market data to determine where the pendulum will fall.

Market conditions always change, and you wouldn’t want to get caught napping. So, keep your ears to the ground to discover critical data that allows you to figure out where prices may go.

With proper analysis, you’re sure to plan your trades more effectively. Whether you want to trade in commodities, indices, forex, or stocks, it’s super-important to focus on factors triggering price changes. You can develop a detailed understanding of market forces and events by conducting technical or fundamental analysis.

So, you either evaluate the market based on key economic data and other news or assess trends using market indicators, charts, and candles. The insights you get from these analytical methods allow you to come up with a suitable trading strategy. Analysing things correctly makes it easier to identify lucrative trading opportunities. Likewise, you develop a keen understanding of risky trades.

Types of market analysis

You can analyse the market using various research methods: weekend, fundamental, and technical analysis.

Weekend analysis

This type of research involves planning for the week ahead. That way, you focus on upcoming economic and other crucial events to identify trading opportunities. It also presents a chance to review your trading activity from the previous week. Doing so makes it easier to identify what you did wrong and how to correct it.

Experienced traders depend on weekend analysis to create a plan for the upcoming week without getting distracted by real-time market activities. That way, you take advantage of a sober mind to identify good trading opportunities. During the week, there are many moving parts because markets are active.

Fundamental analysis

Market events can have a positive and negative effect on underlying assets’ prices. For this reason, you can formulate trading plans based on these events. Fundamental analysis involves researching GDP data, the inflation rate, employment figures, interest rate hikes or cuts and other economic information. So, it’s important to track events occurring on the economic calendar.

Whenever you detect prolonged negative sentiment, it’d be better to stop buying until things improve. The best part is that many websites publish up-to-date economic news. It’s prudent to subscribe to these sites to keep yourself in the know. You don’t want to miss a crucial trading opportunity.

Forex and stock markets typically react to interest rate announcements, jobs data, industry trends, and other key events. Any data or news indicating a given economy’s health can directly impact these and other markets. By extension, it influences your trading decisions on regulated trading platforms. Brokers often provide access to current economic news and market data.

Technical analysis

Although fundamental analysis is crucial to successful trading, there’s one problem. Fundamental factors aren’t always clearly represented in the market price. You can effectively detect these factors by examining historical market trends. In this case, you focus on trends relating to volume and price.

Doing so allows you to gain insights into factors between market price and intrinsic value. Because of this, there’s a need to employ leveraging methods like behavioural economics and statistical analysis. So, the role of technical analysis is to help you predict future events based on what happened in the past.

For a clearer picture of market conditions, it’s advisable to rely on weekend, fundamental, and technical analysis. With the latter, you use charts to gain a detailed understanding of price movements and other trading signals.

Experienced traders maximise the benefits of technical analysis by choosing the right approach. It’s important to employ one of two approaches: the top-down or the bottom-up.

The top-down approach allows you to first analyse broader economic conditions before drilling down to individual areas. For instance, when analysing stocks, you could start with economics before moving on to sectors and, finally, companies. This approach is ideal for short-term gains.

For a more focused view, there’s the bottom-up approach. It analyses specific stocks that you find appealing. The insights you gain allow you to identify ideal entry and exit points.

About the Author

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Mirko Humbert

Mirko Humbert is the editor-in-chief and main author of Designer Daily and Typography Daily. He is also a graphic designer and the founder of WP Expert.