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Types of Analysis

An analysis is the structured scan of an object to determine its relevance. The Foreign exchange market handles different currencies, the individual day traders find it very difficult to earn profits without any analysis on these currencies.Forex and Binary Options Trading usually involve three types of analysis namely technical, fundamental and sentimental analysis, to check the relevance of currency pair during a course of time.

This types of analysis supports the trader’s decision in buying or selling a currency. The reports of these currencies are either made available to the public free of cost or analysts charge remuneration for the same.

Types of Analysis

The Technical Analysis

Technical analysis is an arrangement wherein past prices are used to figure out the future of a given currency. The type of analysis can be done manually or through computerized system. The logic behind performing a technical analysis is that all on-going market intelligence gets showcased in the figures. The traders are of the opinion, that if the price has touched a certain level today, then in all probability it will again touch the same price in future. Technical analysis is the preferred mode of analysis for short term traders, as it involves deferred information of economic values but actual time entry to quotes. The technical analysis is mostly represented through charts due to its outstanding visual appeal and representation.

The Fundamental Analysis

Fundamental analysis, the practice of analysing a security in order to calculate its intrinsic value based on qualitative and quantitative characteristics. It is the method by which the Forex market evaluates the impact of economic, political and social pressures on the sale of an asset. Fundamental analysis makes it easier to differentiate between strong companies and fragile industries. It aids in determining the overall health and achievement of the company through their numbers or sales figures and economic well-being. The impact and future growth of the country’s economy is also predicted through fundamental analysis which gives better visibility in terms of growth and prosperity of the country. The rationale is that, if a country is progressing and has better monetary policy, the demand for its currency will be on high; on the other hand poor economic conditions will prove fatal for investors in the long run.

The Sentiment Analysis

Sentiment analysis is a process to determine the emotional timbre behind words pertaining to some topic. In Forex terms, it reflects the undertone or mood of the investors towards a particular asset. This type of analysis is also known as Opinion Mining, for it portrays the thinking of a larger audience towards a particular target. It also helps in analysing each trader’s favour and reaction, for a particular asset worthiness, leaving aside the information circulated in the market. For example, if there are 200 traders and 120 of them obtain long position in some currency pair, then the market sentiment will be in the favour of these currencies.

Trader’s take sentiment analysis seriously along with other analysis because it helps them in figuring the market emotions more accurately. Understanding sentiment analysis equips the trader to stay ahead of others and gives them an edge in understanding the market penchant.

For conclusion, it is best to know all 3 Types of Analysis and try implementing them while trading, so that you will have a better chance in profiting with binary options.