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Market Analysis – Know Your Market!

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Hello, and welcome to this latest edition of courses on demand brought to you by Forex dot Academy! In this course, we will be discussing market analysis, and there is, of course, inherent risk when trading these financial markets. So, as we begin, please do take a moment to familiarise yourself with the following disclaimer.

When discussing the market analysis, first and foremost, we must outline the difference really between trading versus investing, so we can grasp an idea of the market participants that are trading in these markets, and whether they look to hold positions for short medium or long periods. And that brings us into discussing, and really developing upon the trading skills of thoughts. So, what we have is fundamental analysis technical analysis, and sentimental analysis, and these traders whether they have a hybrid of different trading strategies or not will take on board some of these feelings or objectives into their trading then we’ll be looking to trade these perspectives on some price action charting, and just towards the end of the lesson to actually practically apply what we have discussed throughout the webinar first before most let’s try, and define the difference just Anna lemons expression with trading versus investing when it comes to wealth creation in equity markets in particular investing, and trading are two very different approaches in generating a profits in the financial markets okay. So, let us imagine today that yourself, perhaps on the friend bought an equal amount of seeds to sow in in a garden or field we then sold, I sold many seeds in a day because I could earn a profit. So, I’ve traded I’ve made a trade, and they’ve earned a profit that’s great your friend on the other hand and sowed the seeds, and let him grow for a few years till they gave I created new seeds he then sold the new season continued this for years and sold a lot more seats eventually than were initially bought. So, obviously, he has taken a much more longer approach to developing his seeds to developing his purchase and invested those seeds in a future respect us by investing his seeds. Your friend has made a profit in quite a different way than what you made by trading your seats okay. So, two very really a big stark differences here in terms of discussing trading versus investing first of all the time period obviously I’ve decided to buy the seat, and sell them in a very quick period of time I’ve made a short-term profit that’s absolutely fine no your friend or the guy who decided to invest these seeds obviously, and growing more seeds over a longer period, and probably growing his overall perspectives or project, and would have of course made more money on this one particular trade but would have taken or accomplished a lot more time towards this project that is the same for investing over a long period of time. So, if  you’re looking to purchase, perhaps equity shares in Google or Microsoft or a company of your choosing you will be looking for long-term growth, whereas an advantage as opposed to the trader there it is a short-term profit, perhaps that transaction was completed in 30 minutes or one hour I could make potentially thousands of those smaller transactions, and still make profit, and by potentially lots, and lots of seeds, and sell them resell them at a higher price. So, there’s a big difference in actually these two approaches, but they could both be very profitable approaches to trading at this market in particular. So, just a food for thought there let’s delve in a more detail the differences between trading versus investing the time period trading is a method of buying or selling a security for a shorter time period, and for shorter-term profits today as liquidity allows quick entry, and exit, and profits can be true to leverage okay. So, we know that, perhaps as forex traders we can trade we can use leverage to trade very small amounts of currency but actually to make much better profits in terms of the relational move in the currency pair investors choose to invest capital amounts for longer periods on hope not only to profit for price increases but profit from ownership as well. So, obviously, if you’re looking to invest, perhaps commodity index or, and share a particular share of your choosing you’re looking for capital growth. So, you’re looking for the price to increase over a long period of time but there are many potential up sites as  well, to, perhaps only in the shares that dividends obviously corporate earnings can affect you there, and you can look to actually build a portfolio based on actually only the physical shares as  well, capital growth taking us on nicely to discussing that trading on the other h, and focuses more on the movement of price unders based on more skill from timing investing aims to create long term value unless is less worried about shorter timeframes okay. So, that’s very important to note as an investor we’re not particularly worried about what time of the day that we enter this trade perhaps, if we are concerned with, perhaps only in these shares for a 1-year period or a longer time in search of value. So, that is very important, and potential upside in investing, and al. So, the time focus of trading in terms of that capital growth you could be in a trade for one day or for three hours or for thirty minutes depending on how you’re looking to trade the markets for that capital growth an art versus skill is a good discussion, and brings a lot of analysts who actually to discuss the real techniques involved in both trading, and investing traders are most certainly skilled we have many technical individuals who time the market, and learn market trends to hit higher profits in a stipulated time investors analyze the stocks they want to invest in, and investing includes learning business fundamentals on a commitment to stay invested for a longer-term. So, we do know in terms of our research that it is really much I suppose an art investing a lot of research goes into your to your fundamental analysis, where  this, whether you’re a short-term scalper or looking as a technical trader for price points or inflection points, are very structured technical analysis to give you your trading signals there’s a certain skill as opposed to the art, and in there within each time period respectively, and risk, of course, is of high-end keen importance here, and in terms of discussing trading versus investing trading involves high risk due to much higher possible returns okay. So, it’s very important to note and more frequent trading. So, obviously traders the reason why we look for those returns, and in terms of the investment community, it’s a very different discussion that you do have you often get investors asking well, how much return do you make as a trader? And for me I really find that a strange question because it’s not relative in terms of return, and only in the portfolio of assets over potentially a 1-year period you’re looking to get more stuck in there in terms of trading the markets, actively trading the markets you might make 500 euros in one make you might make 2,000 euros ‪in one week‬ you might make twenty euros ‪in one week‬. ‬‬‬‬

So, it’s there it is relative to your current size, and how you trade the markets sometimes you traitor you’re trading very  well, but it’s the consistency over a long period that defines, and makes you a definitive effective trader, where as investing involves lower risk unreturned, and is often a more complex function of price interest on potentially dividends, if  you’re looking for growth as  well, in terms of return because you’re looking to effectively what you’re looking to do as an equity trader is I’d perform an equity index for higher return let’s say the S&P; 500 is returning 6% in 2018 we will be looking as long-term investors to outperform that equity index, and to really perform in terms of beating the index, and make a higher profit however in relation to trading obviously, if  you were looking to trade the markets more actively, perhaps very actively for one year 6% over a one year period most certainly would be not a high target at all would be respected as actually looking for those sort of more long-term approach targets let’s discuss the N or trading skills of thoughts first, and foremost fundamental analysis  well, what is it is the examination of the underlying forces that affect the well-being of an economy in history group or company. So, it’s very important to understand, and fundamental analysis isn’t just trading, or it isn’t just investing in stocks, and shares you can have fundamental analysis in a gold market in the commodity itself in any commodity there, coffee sugar wheat oil and. So, anything that you really can do research in to get more knowledge on the fundamentals, perhaps the supply, and dem, and function of that market is a particular interest to you as with most analysis the goal is to derive a forecast, and profit from future price movements okay technical analysis is a methodology for forecasting the direction of prices through the story of past market data primarily price, and volume, and really that’s what all the technical techniques in terms of technical indicators point to that point to either primarily a change in price or a change in volume market participation. So, technical analysis is that study, where  we use these technical tools we look at previous price action to actually get a formula divide ear of, where  price is more likely to move to then we develop our probabilities in trading those in terms of stacking the odds in favor as a technical almost on l, and trade in pulling the trigger to actually get involved more heavily with these markets than a fundamental trailer, and then sentimental analysis it focuses on identifying, and measuring the overall psychological state of all market participants it attempts to quantify what percentage of market participants are buyers are sellers, and obviously we know they’re both called bears on bulls respectively. So, we have our trading schools of thought we often see a traders or investors develop a myriad of trading strategies or, perhaps a hybrid approach whether they’re they combine all three or whether they choose to combine one or two together separately, and most traders will develop more of a hybrid approach actually trading the markets, and it does depend on is indicative of what asset class you’d like to trade or invest in. So, let’s discuss in much more detail fundamental analysis what we discussed there is the examination is the underlying forces that affect the well-being of an economy in history group commodities, and companies. So, what does that mean?  well, let’s say that we want to trade the 40 fundamentally we want to invest the in the 40, perhaps or, perhaps we are looking for opportunities aware from the 40 100, perhaps more central European markets, and we’re looking to outperform these equity indexes that are, perhaps generating a 4 or 5 percent per year then we can actually look at the 40, and analyse it fundamentally with, perhaps the top ten performers understand, and why the market is, perhaps under price at the moment are in relation to what’s happened in 2017-18 in terms of depreciating sterling that might have a, and certainly how sort of strengthening in fact on UK assets. So, there are some fundamental analysis in the well-being of that economy in high things, and assets a price within an economy let’s go into industry groups, and we know that London is famous for its financial services industry we can certainly do a portfolio of research there, if  we find that is performing  well, we can use that analysis to look for our opportunities, and we know what companies are, perhaps I’m under, and I performing within the UK at the moment. So, we can use all this research together to really combine a portfolio of our research to give us an idea of value is something under our overvalued, and make an assessment as such, if  it’s undervalued we potentially look to buy that asset and, if  it’s overvalued we potentially look for selling opportunities or look across different sectors for correlated markets to potentially buy those or invest in those assets. So, there is a lot of research that goes into our fundamental analysis. Let’s take a case here. So, what we have here is a bit of comedy sketch I suppose with OPEC I’m Saudi Arabia really leading the charge with OPEC we have the market share pamphlet that we have, and then the quote is fracking Americans. So, we know that there have been I’m really investing a lot in this new process of fracking of drilling down, and in finding oil, and gas beneath the surface of the rocks that has led over the past five years to a huge surge in supply u.s. supply in the oil market. So, what do we do is a fundamental analysis analysts how do we approach this how do we approach first of all our research in this environment how could we potentially assess trading opportunities  well, let’s move on to actually discuss a bit more fundamentals of the  well, being again of the economy we have what is known here as a shift or an increase in demand, and from D to D-one. So, just with the right-h, and picture there we can see our axes we have WTI crude oil price, and the quantity or that were suppose that’s indicative of demand, and supply. So, you can see as there’s a shift in demand, and from A to B, and that actually will be reflective of an increase or decrease in price given what will happen. So, with our example here with this the increase in fracking in terms of US production it really caused an increase in surgery with the past four to five years in the oil market we know that OPEC and many oil-producing nations have tried to combat this by introducing supply cut extensions, and these are still ongoing in the oil market to look to actually manipulate the price of oil or to keep it above its above I suppose the 50 $60 level we did see a very strong sell-off cause a shift in demand, and, and obviously an increase in the price of that commodity itself, and we often see these retractions or contractions in supply caused a shift in demand, and, and therefore price react in such a fundamental way. So, that’s a bit of a fundamental announced case in the oil market as a traitor you could position yourself for long-term price gains in this commodity, and certainly, that’s something you could have done in 2017, say, at the start of 2017. I was trading around thirty-five, forty dollars. It’s not at sixty, and sixty-five dollars, and we’re seeing that a price fluctuating between 60, and 65. So, I’m certainly a lot of growth in the oil market, and that’s a result of a lot of these fundamental changes or shifts in actually pricing or looking to price the asset here we have a price action chart in front of us this is the gold market, and we see that we have quite a lot of technical analysis already imported on to our price action chart. Now, these are daily candlesticks. So, each of these, and trading periods represents one day in the gold market at the very high we have a long-term resistance level there that’s probably providing some support for sellers in this market in terms of looking to fade this, and long-term strength in the market we can see they’re roughly around six months ago it was trading quite strongly up to that level on immediately reversed with a very bearish trend, and indeed in regards to more relative price action we can see that it has touched the level of resistance one-two, and three times almost, and obviously that is the high of a Fibonacci retracement from the more relative low to high of the market.

So, that would possibly provide us with an indication technically that this market is not looking to continue to the upside. Now, do bear in mind that using these technical indicators do conflict trade ideas at times as well, if  we look at the moving averages we have three respective lines won’t being a 200-day moving average that’s a red line then we have a 100 day moving average that is our green line, and the more I suppose constructive – – more recent volatility is the orange line which is the 50-day simple moving average, and that won’t move, and in relation quickly move to new changes in price in this market, and that will give us an overall, and Tran structure to the upside that this market is actually polish over those time periods which will actually conflict, perhaps with some of the technical analysis. So, you do need to know what type of trade you’re looking for what term of the trade you’re looking for as a technic illness, and, and what those other measures, perhaps like observing the daily volume, and the relative strength indicator will access, and, perhaps accept or reject your trade decision we can see that the volume did experience increasing momentum with this volatility in the most recent price action it is. Now, looking to decrease over the last three trading periods which maybe would suggest as  well, that, and there is decrease in volume in terms of looking to buy this market as it reaches new highs then we see relative strength indicator it really isn’t giving us a signal it’s roughly around 60 below 70 overbought period but it’s up there it’s getting close to that level. So, it might be something we could consider. So, that is what we do is as technical analysts look it took a bind at many different indicators technical areas or price inflection points of, perhaps historical pricing in a market to actually give us an idea to look for trading opportunities or to stack the odds in our favor in terms of probability. Now, in a plain technical analysis to a more structured short-term view we call these traders or technical traders price action specialists are many traders look to use technical indicators as  well, as observing, and trading the price action to give you an overall technical structure of the price my question that I would like to pose is how would we assess this chart just due to the price action to look for potential trading opportunities  well, let’s do some analysis here we have from low there we have a bit of a trend to the upside, and as at the bottom of that trend we can see a bullish hammer that would potentially give us a signal that, and there’s no more selling opportunity after that candle close, and that’s potentially the market is looking to reverse it certainly does and causes a very bullish trend in the gold market, and to the upside we can see that supportive of training candlesticks we see a very constructive trend to the upside over, perhaps two weeks price action. So, that would indicate the over all trained structure he’s very solid in terms of polish momentum we see an engulfing bullish combo, and just breaking up for a little from a little level of price consolidation I’ll just point that out in terms of, and address in the market itself we see this, and little Tran structure in here, and then we get a break just to both with this bullish candlestick giving us a signal that there’s potential more momentum for this market to continue to the upside we then see the reversal indecision with her countenance legs up towards the top of the market, and that would indicate, perhaps just looking at the price session we like to call these areas double tops. So, I’ll just draw this in that we can see this double top phenomenon I would indicate to us that we’re not actually getting continued strength to the upside with the candlestick structure themselves they’re certainly rejecting a price movement in terms of bullish activity then we see something quite significant we call this candlestick, and a bearish dragonfly which actually tries to break a level a very supportive level, and then close above the level which it actually has closed quite a bit above this level indeed. So, that would indicate we have some market support in an around er level here, and it’s a bullish market support. So, we’re still looking for buying opportunities, perhaps as a technical analyst or perhaps, if  you like the selling opportunity from those highs, and with the reversal, and decisions you’re looking for more of those again what we see with the most relative price action just in, and around this point is a market exhaustion I can that’s the gold market. So, it’s from our long-term high it is a lower low excuse me it is a lower high from the most recent price action again, and with the third I suppose shoulder in terms of looking to trade to the downside, and this could be an idea for us to look for potential trades to actually sell this market to the downside. So, that is what we do as technical analysts to use the price action whether you’re a price action specialist or you’d like to combine technical indicators as well, or simply make a hybrid approach indeed that is higher technical traders will look actually to formulate price discovery, and make trades. So, let’s move on to discussing a sentimental analysis sentimental analysis aims to assess at all times who is in control of the markets trading decisions can be made on either a short-term or a long-term basis the sentiment changes in the marketplace shorter-term traders will look for news events to cause a centum shock while longer-term traders will take a longer approach to the bullish, bearish outlook of the market. So, it’s all about assessing who is in control of the market at any given period at any given a price point when you’re actually looking to trade that time period. So, whether you’re looking to trade daily camel sticks only daily camel six, perhaps that structure you’ll be looking for longer-term trades, if  you’re looking for sentiment shocks you know you break that day down into assessing the five-minute candlesticks I’m looking for sentiment to tell you who is in control of that time period, and in the day, where  the volatility is suggesting there’s a price shocker or sentiment is shifting. So, what I’d like to pose is a couple of charts here we can actually assess the market, and very basically itself, and it all leads into just focusing on the sentiment or the feeling of the market at that time. So, here is a control of this market.  Well, what we see is a very clear trend. Now, I know this is related to actually studying the markets with price action on technical analysis, but this is purely speculative on sentimental analysis by judging the market we can see that there has been a level of recovery. So, that is more of a value question in terms of its fundamental approach there is a level of recovery in the market it’s trending up, and the market is very supportive in this long-term price trend. So, if  we are trading this in the long term, and again these are daily candlesticks here in our own Swiss market as a forex trader we will of course develop more of a strong sentimental approach to price growth, and more an appreciation in this currency pair let’s move across to yet another currency pair to potentially assess that chart, and really derive an idea of again who is in control of the market here we have the in the end market, and Forex pair, and we can assess it purely from a sentimental approach again. So, again, these are daily candlesticks, and I’ll just highlight that in terms of the actual price chart as well, we have daily count 6 or Canadian yen who is in control of this market, where we see a very well-structured trend to the downside. So, initially, just by looking at the market, we have a directional bias, of course, we do as a sentimental trader it’s all about your feeling of the market, and the market participants or who is in control of the markets are certainly looking for selling opportunities in this market.

we can see apart from the transferor moving very much strongly to the downside. We could see that buyers don’t even enter the market really, we have one buyer are not as quickly I’ve done with some price movement to the downside we have a second buyer again price movement to the downside a buyer comes in potentially looking to trade the market up as buyer 3 we’ll call we see continuation to lower prices buyer for again. So, you can see, where  I’m getting out here sentimentally we are thinking there are no buyers in this market, and we’re seeing this trend structure really start to push to the downside again it does lend itself to discussing it, and that is why a lot of these traders do take on a technical, fundamental approach, and hybrid their trading strategies but sentimental market participants again potentially for not a trader but you’re an investor, and you’re looking to judge sentiment in the Canadian Japanese yen you’re going to observe this market on what you can see in terms of the price structure is that the market wants to trade down on our sentiment is bearish we’re bearish this market, and we’re looking for selling opportunities or potentially waiting for the market to change our sentiment to change. So, that we can look to buy this market that is a very important point as  well, for sentimental traders the times these home traders will have fundamental analysis, perhaps for the Canadian yen, and are simply looking for buying opportunities, and given they need to make an investment in such a market that is certainly the case as  well, and you can get very good trades off just due to how the sentiment, perhaps Lee, perhaps will shift in terms of a short-term shift in sentiment let’s move across to a third, and final market when considering sentimental analysis we have the gold market again, and what we see this is a more relative price section that we have viewed over the last two charts or when discussing technical analysis in different time frames here we have, and the most recent relative price action, and in in the cold market, and what we can see here over, perhaps a month maybe five weeks of trading is that there is no strong sentiment in this market or not can answer. So, many questions for you as a sentimental trader who is in control of the market.  Well, neither bulls or bears are in long-term control of this market. It is an upper in turnaround, and not long-time highs but certainly highs of the past three years. So, it is an area of interest for sentimental analysts and traders, and we’re looking for opportunities to really see a shift in this sentiment is the price, and going to really breakthrough or long-term level then sentiment will really shift, and all these short-term traders will really change their sentiment in terms of being bowls in this market, if  that is the case I do not need to know why as a sentimental trader I just need to know that I want to follow this sentiment as the market shifts potentially as we discussed with our technical analysis that we did have a bit of a price structure at this resistance level here. So, potentially just think logically of this as a trader, if  the market trades down, and looks to break this level could we argue that the sentiment is shifting to the downside in this market, and market participants or who is in control of this market is actually changing, and towards the bull that the Bears certainly the answer will be yes, and to take that into consideration in our sentimental analysis. So, let’s just put that all into detail in terms of searching potential trading opportunities what I would like to look at just to finish off is on market analysis with different perspectives here, and obviously the question is how you do traders analyse the markets  well, market analysis we know that primarily we have three main schools of thought we have fundamental technical, and sentimental analysis, and those traders obviously look to position themselves with a different decision-making process as trainers in the markets first, and foremost we have a price action short in front it’s the Chinese, and 50 equity index, if  we were first, and foremost, perhaps a fundamental trader how would we look to trade this market  well, overall we know that we are in a very strong bull market in terms of higher global equities are performing at the moment. So, that leads us to observe our long-term price trend, and obviously we have a directional bias to the upside; secondly, we understand, and the construction on manufacturing sectors of the Chinese economy to be very strong, and very important in the overall growth story. So, such tech firms are at performing that I would leave to continued growth we know that industry and construction are very important as well, and we have seen bond markets in such metals, and copper, and aluminum over the past year. So, that would lead us to, and to speculate that there is strength latent in this market, and one can follow this momentum to the upside how would we position ourselves on strainers fundamentally  well, the question is always on value we look for value opportunities, perhaps we follow an investor, led by the tip sentimentality, where  we can look for opportunities to actually bury this market to the upside with a very strong directional bands fundamentally this market is strong how do we look -, perhaps trade this market, if  we were to apply our technical analysis  well, first, and foremost we can see there is a very obvious trend to the upside. So, that confirms our technical directional bass to be common buyer okay then we look for opportunities to, perhaps follow a price channel we can see a few very well-defined price channels here which leads to or words momentum but remember as technical traders we’re looking for, perhaps levels of plants consolidation. So, we can see one here in the middle it actually starts to follow, and consolidate a trading range. So, we can look for shorter term opportunities, perhaps within this range, if  we don’t want to trade the long-term we could buy, and sell of course the lows of these trading ranges, and, and when the price structure breaks down they have still a directional bias to the upside we follow the breakout to the upside when that occurs al. So, remember we are technical traders that we can look for shorter term opportunities in potentially some sentiment that may shift the market in the short-term by simply looking at the Japanese candlestick structure here we can see that have a very strong candle, and golfing marbles are to the upside then we have a doji or indecision candle, and then a complete reversal from the next candle there. So, that would lead us to speculate that there will be some continued in the short run at trading to the downside. So, a few potential trades that are obviously both in a long medium, and short-term trading opportunities for the technical trader how did we, perhaps look to trade this market, if  we were to base our decisions purely on a sentimental analysis approach  well, simply by looking at the price action over the long-term we can answer the question who is in control of this market over the long-term, of course, it is the balls. So, sentimentally, if we take a directional pass, we are, of course, buyers in this market, then we can al. So, look for short-term buying opportunities, where  we see a sentiment, and combos, and these would be they think about an actual common stick structure, where  there is more volume, perhaps there is more trading, and the ATR it’s greater than a candle that would lead us to say there’s momentum when the sentiment is stronger in itself or, perhaps a well-formed range whether it’s clearly total control from the buyers that would focus our attention on actually trying to capture these great opportunities as a sentimental trader we al. So, know sentimental traders will look at short-term shifts or changes in the sentiment. So, the name another example here we see a very very significant change in sentiment that leads to the market actually pulling back from new highs for a quite sustained period perhaps, and one week to week period, and then forms a range. So, definitely a good trading opportunity, thereby trying to find these areas, here is another one. Perhaps the market has reached a high on sentiment is changing what the feel of the market participants are changing on the direction of principle that is as a result changing, and allowing these trading opportunities. So, there we can see three very different perspectives in how to actually look to trade these markets both fundamentally technically or sentimentally, and the answer or question is really up to you as an individual trader whether you want to delve into one particular school of thought or maybe embroider or combine all of these approaches into your own hybrid style of trading, and that will develop your own trading strategy of course. So, let’s move on to the webinar review this concludes the lesson what do we learn in this lesson  well, we learned the main differences between trading versus investing whether it is based on a time approach to your old trade or, perhaps you’re looking for value as opposed to actually looking for a short-term price speculation then we discussed the trading schools of thoughts obviously in a lot of analysis within the webinar we have fundamental technical sentiment analysis, and higher traders could actually position themselves in the market. So, that brings us to the end of this market analysis webinar thank you very much for joining us on this instalment of courses on demand, and I brought to you by Forex dot Academy, we do hope to see you very soon bye for now.

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