How to read the forex market

Read The Forex Market

Market Analysis isn’t just looking at your charts!

One of the biggest misnomers in trading I believe relates to Market Analysis. Now that’s right, that isn’t a typo, I’m talking about ‘Market Analysis’. It includes both Fundamental analysis and Technical analysis.

Most inexperienced pundits out there believe Market Analysis is just technical analysis and that’s a load of codswallop. So the majority of people think they are analyzing the market when in fact all they are doing is looking at their charts.

And on top of that 95% of the time, they are looking at various ‘indicators’ to assess the market instead of the raw pricing and trendlines.

It’s completely INSANE!

To Analyse the Market you need to Assess the Fundamentals & Technicals

Of course to be able to analyze the Fundamentals (central banks & economic data) you need to understand them. And since all the ‘forex educators’ out there are home-schooled they don’t know what they are…. so they just leave them out!

It’s a damn shame and a major reason why the majority of traders fail long term to make a living from trading.

Let me give you a run through how I was trained and how we train our clients in our courses.

Fundamental Analysis

The first thing to understand about the Fundamentals is: Currency direction comes directly from the Fundamentals.

There are 3 majors components to the fundamental analysis: Central Banks, Economic Data & Geopolitical events. The first two we can quantify so we focus on them very closely with the third being a completely random event and almost immeasurable.

It all starts with the Central Banks. They have clear policy targets and protocols to follow. They are completely transparent. So it makes it easy for us to know what they are going to say and when they are going to say or do it.

Their job is to implement Monetary Policy’. They do this with a clear measure on Inflation and these days also via Employment. This is where the economic data comes in.

How to read the forex market

Economic Data – There are 3/4 key economic data releases the Central Banks focus on very closely. If there is a shift in this data then the market shifts with it because it means there may be a change in policy (interest rates) if the numbers are consistently strong or weak.

Geopolitics – it’s the wild west. Narcissistic lunatics like Trump can’t help but cause trouble. These events are random and more important to avoid than actually trade them. They throw the natural flow or momentum of the currencies completely out of whack and are a complete nuisance. A point of note: North Kore Nuclear issue, Brexit, US-China Trade tariffs, etc

Now when you assess all of the fundamentals we’re looking for clear sentiment on each of them.

Ideally, the central bank sentiment matches the economic data sentiment and the currency should have very clear direction, characteristic of trending markets. If they are mismatched then we have sideways markets!

So you can see, understanding if the currency pairs are going up or down it’s rather important!

So when you are analyzing the fundamentals you should be thinking to yourself….. is this pair going up or down? Because that’s exactly what you’re looking for!

Technical Analysis

The technical charts are the form guide to past future price movements and provide a pretty good picture of where the currency pairs are going.

Don’t get me wrong, Technical Analysis plays an extremely important part in Market Analysis because it shows us clearly where to enter and exit the market. Plus it shows us clearly the trends (if any) that are currently in the market.

So if you’ve been away from the screens for a few days or a few weeks you can look at your charts and see if it’s in an uptrend, downtrend or just trading sideways.

How to read the forex market

But that’s where most people get off the bus, oblivious to what they are really looking at or looking for.

All the bankers are trained to draw and monitor support and resistance trendlines. Contrary to popular belief, they do not add a bunch of lagging indicators all over their charts in the hope that they will tell them the currency is going up or down.

The bankers are the market. They control over 90% of the volume. They enter and exit the market using trendlines. End of story.

That’s all you need to know. Once you understand this you don’t have to worry about anything else.

Bring the Fundamentals & Technicals together – Professional Market Analysis

So when you’re analyzing the market each day pay particular attention to both areas of the market.

If you can isolate direction and entry levels then you’re well on the way to consistent profits.

But I also get it, this process is a tough one for new traders to get a grasp of, and that’s why we have developed our Daily Analysis the way we have.

So you can understand the 3 majors things you need to ‘analyze’:

  • Central Bank Sentiment
  • Key Economic Data Sentiment
  • Overall Technical Sentiment

I put this video together to explain what I mean and help you understand that the answers are right in front of you. You just need to learn how to ‘read the market’.

The Skill of Reading the Market

It’s a skill up until now only the bankers really understand, and that’s because they do it day in, day out for years. Hell, I’ve done it for 28 years so it’s ‘natural’ process.

When you combine the Fundamentals with the Technicals, that’s when the magic will happen.

If you see opportunities where the Fundamentals have turned but the Technicals haven’t yet, well you’ve got a great trading opportunity.

When you see the Fundamentals and technicals combining together, you’ve got awesome direction and entries… what more do you need.

Say the fundamentals are fighting each other and the technicals are neutral, you know to stay away.

Are you ready to become a Pro Trader?

This process of ‘reading the market’ is just one of the things that’ll we’ll be going through with a fine tooth comb so you know exactly what to look for and why you’re doing it!

Once you have this skill under your belt you’ll see the market in a whole new light.

You’ll be in a completely different mindset: In control, complete understanding, it’s a game changer!

Related Articles

Forex Fundamentals 101

If you cant understand the Forex Fundamentals you cant workout the direction of a currency. Forex Fundamental Analysis provides the additional information to Technical Analysis to give the forex trader a full understanding of the Forex Market.


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CAD – Inflation Rate YoY