100% accurate forex analysis is impossible, but that doesn’t mean you can’t get high-accuracy forex analysis methods. The question is, what are examples of accurate forex analysis with good percentages?
Believe it or not, accurate forex analysis is not determined by the type of method used, but by how you apply it. A method of forex analysis can have different levels of accuracy, because each trader’s understanding tends to be subjective.
For example, trader A considers the Price Action technique to be more accurate than the MA crossover method. However, according to the test results of trader B, the opposite happened. Such differences are commonplace and understandable. Like traders A and B, there are parties who are used to relying on Price Action techniques, but there are also parties who cannot be separated from indicator signals.
Important Characteristics In Accurate Forex Analysis
Thus, it is clear that the accuracy of an analysis is not distinguished from the method. So what are the characteristics of an accurate forex analysis?
1. Has a combination of technical and fundamental
An analysis that only relies on technical or fundamental cannot be said to be accurate. What if a technically measured price setup is suddenly disrupted by shocking news from the Central Bank? Also, how can you look for potential entry or exit points if you only rely on fundamentals?
Technicalists and fundamentalists may argue which one is more important, but either way, neither of them can deny that each method cannot be an accurate forex analysis that stands alone. In fact, the conflict between the two parties highlighted which one was prioritized more.
Technicalists usually rely more on accurate forex analysis that relies on price action techniques or indicators. However, technicalists will also arm themselves with basic fundamental knowledge. That way, they can know when to exit in order to avoid the volatility of high-impact data releases, or secure positions from further risk in the event of surprising news.
On the other hand, fundamentalists always apply accurate forex analysis by observing economic, political and other sectors that can affect currency stability. Forex news updates are a daily meal that can’t be missed. Based on these fundamental observations, they will know how the next price sentiment will be, then make trading decisions that support these conclusions.
But still, entry and exit positions are determined (at least) according to support and resistance levels. Fundamentals alone cannot be used to find potential entry and exit points.
So it can be concluded, whatever the direction of your accurate forex analysis will be, don’t completely abandon aspects that are not your priority. If you choose to side with the technical group, then keep your eyes on the economic calendar and important news releases. The same thing applies if you are more inclined to accurate forex analysis from a fundamental standpoint.
2. Refer to Important Levels
An important level in forex trading is an example of a crucial level which, if it is successfully penetrated, can be the starting point for a breakout, but if it fails to be penetrated, it will become a strong barrier and become a turning point for the price to return to its original trend.
Support resistance, psychological (round) levels, pivot points, trend lines, and Fibonacci lines are examples of important levels that are commonly used in accurate forex analysis. You can choose which one is the easiest to understand and apply, then test its efficacy on a demo account.
Don’t use all of them together, because the signal from each important level can be different. Instead of getting accurate forex analysis from mutually confirmed signals, you will find it increasingly difficult to read opportunities.
3. Paying Attention to Price Patterns
Indicators are really helpful, but that doesn’t mean you can depend entirely on the tool. However, indicator calculations are based on existing prices. So no matter how leading you are, the indicators are still based on the past. If you only rely on something that calculates previous price movements, then your trading is clearly not supported by promising accurate forex analysis.
Therefore, it’s a good idea to ensure accurate forex analysis by observing chart patterns and price action techniques. The MA crossing signal, which is complemented by the appearance of a reversal pattern, will obviously be more convincing than the MA crossing signal alone. Even when you combine 2 or 3 indicators at once to get accurate forex analysis, the signals you get are still lagging. Not to mention, there is still a risk of repaint or fake signals when the indicator is applied on a small time frame,
4. Not Following Rumors
Monitoring news updates is important, but it’s best to learn to distinguish them from rumours. Speculation is usually unscheduled on the calendar, but related to important, shocking issues, ranging from central bank policy projections to political situations that could threaten global stability.
When they first appeared, rumors could indeed trigger big moves. Those who are part of the movement usually do not prioritize accurate forex analysis and are easily provoked by market panic. In the end, such turmoil would not last long. Prices will only be triggered up or down drastically for a while, then return to the previous trend.
Instead of following uncertain speculations, it’s better to avoid trading for a while. Come back in once the rumors have been confirmed and the market has finished digesting the news. This can be detected from price fluctuations that are no longer volatile. Even if the previous issue is true, you don’t need to worry about missing the moment, because open positions can still be done by following the ongoing trend. Practically, you can still use accurate forex analysis even though the market has just been hit by rumors.
The analytical method cannot be said to be accurate if its efficacy is only written on paper. To prove accurate forex analysis, you need to do a test first on a demo account. There are two kinds of trials that are usually carried out in forex trading: Back-test and Forward-test.
If you are using MetaTrader 4, a Back-test can be done using the Strategy Tester. Basically, the tool processes the analysis results on historical price data, so you can get an accurate picture of forex analysis testing in a short time. Unfortunately, Strategy Tester can only process tests for EAs and indicators.
As for the Forward-test, the way to test it is by trading on a demo account as usual. Because of the Forward principle, the data used is the current and next prices. The Forward-test is more accurate than the Back-test because it is relevant to the latest price movements, it can also be combined with various analytical methods. However, the process of getting the results takes longer because it needs to be done within a certain period, for example the next week, the next month, and so on.
6. Applied With Discipline
The last characteristic that marks an accurate forex analysis is the way it is applied. It’s useless to have an analysis method that is tested and strengthened by a combination of technical and fundamental, if its use is not consistent with the rules.
All Back-test and Forward-test efforts will be in vain. The level of accuracy of the analysis is also reduced because the rules are changed for no apparent reason. At times like that, you are like a trader who only relies on instinct. Even though outside said it relies on an accurate forex analysis that has been tested, the results cannot be proven because there was a violation in the application.
For example, you have got an accurate forex analysis method with price action techniques to anticipate reversals. But because you get a new indicator that is said to be more effective, you no longer pay attention to Price Action techniques.
When the indicator’s signals and Price Action techniques end up contradicting you, you instead choose to believe in new, untested indicators. If it’s like that, you can’t say that you have applied accurate forex analysis with the Price Action technique. The rules based on Price Action techniques have been broken, so how can the results be accurate?