In the stock market, superficial research means simply looking at price and P-E ratios. There are many, many layers of information which must be sifted through before a company can be considered a good or bad “buy”. The company’s financial statements, their management team, their position amongst their competition; all of these factors and more determine the strength or weakness of a company.
In FOREX, we don’t have the burden of financial statements per se. However, we can still analyze a currency’s strength or weakness based on a number of factors. Combined, these give us a better indication of a particular trade’s worthiness. If you insist upon predicting future movement (and I wish you wouldn’t), you should be familiar with, at minimum:
• The currency’s “behavioural characteristics”
- How much does it move: Hourly? Daily? Weekly?
- Does it move abruptly? Gradually? Does it “spike”?
• The economies of the currencies in the pair.
- Strong? Weak? Budget surpluses or deficits? Et cetera…
• General market trends. Up? Down?
• Where the current price is relative to:
- Today’s movement
- Yesterday’s movement
- Last week’s movement
- Last month’s movement
- Et cetera…
• How the micro charts (15 minute chart or smaller) relates to the macro charts (4 hour or longer)
• And the list goes on...
So as you can see, there is much more to a successful trade than simply pointing and clicking.