The idea of constantly monitoring the market might sound intimidating to those who are new to trading. Just think of all the charts and tables — these look absolutely overwhelming! Talk to a dyed-in-the-wool adept of trading, however, and you’ll find out that daily analysis is part and parcel of the activity.
A lot of questions arise when a newbie faces the need to perform a daily analysis. Here’s just a shortlist of those:
- If I’m using a forex broker in India, should I really care about what’s going on in the rest of the world on a daily basis?
- What data do I need to look at?
- Who gathers the information that I’m supposed to analyze?
- Is there a way to reduce the time I spend on the daily analysis?
Here’s a brief article that answers these questions and explores the fundamentals of performing market analysis on a daily basis as a trader. A bit of theory is included in case you aren’t familiar with the terminology.
Table of Contents
Aspects to Take into Account
One of the biggest questions is what to look at. The purpose of daily market analysis is to identify signs of upcoming events that will trigger a certain decision according to your pre-set strategy. That is, you need to know when a moment is approaching which you believe is right for closing a position. To work out the tactic and stay aware of the current trends, you need to distinguish between the so-called fundamentals and daily changes on the market.
In trading, fundamentals refer to general stock health indicators. On a company level, these include but aren’t limited to the business’s revenue, assets, and liabilities, always perceived in both macroeconomic and microeconomic contexts reflecting supply and demand, unemployment, inflation, and more.
You’ll notice, if you haven’t already, that the current market price of this or that instrument isn’t always determined by its fundamentals. Trading would probably be meaningless if it were. Daily changes in the economic environment influence existing tendencies and produce new trends, and here’s when technical analysis comes into play.
The term “technical analysis” refers to reading charts and other sources to get an insight into the current situation. Most importantly, you want to have an idea of your stock’s price action. Candlesticks are the most common form of plotting price stock price against time.
Quoting services such as Level 2 and ECN offer you the best bid and ask quotes currently available, which enables you to watch price movements almost in real-time. Finally, the news isn’t part of technical analysis if you take the classical definition but should be part and parcel of your daily routine.
Keeping Calm as an Investor
Stocking to your strategy is key; panic-driven decisions rarely work. It’s important to learn to only trust sources that are reputable and reliable while also following a specific plan. You need to work out a tactic in advance, specifying the moment when you’ll enter a position in a way that lets you identify it unambiguously when it comes. Use your daily analysis in coordination with this and watch your profit increase.
Stay Up to Date (But Don’t Jump to Conclusions)
Making sure your decisions are informed is vital to a successful trading strategy. Even if daily trading isn’t your preferred approach, staying aware of the most meaningful movements is just as important as understanding the big picture. This is because local currents sometimes prove to have global consequences.
An informative daily analysis factors in both fundamentals and technical analysis data, resulting in insights into how the situation might develop. Try using analytical tools such as those offered by FBS to automate the process and save your time. Start reaping the rewards now!