Wikipedia – “A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and thus in turn of the global environmental analysis. Through all of these analyses, the strengths, weaknesses, opportunities and threats (SWOT) of a company can be identified. Finally, with the help of a SWOT analysis, adequate business strategies of a company will be defined. The market analysis is also known as a documented investigation of a market that is used to inform a firm’s planning activities, particularly around decisions of inventory, purchase, work force expansion/contraction, facility expansion, purchases of capital equipment, promotional activities, and many other aspects of a company.”
Market analysis is one of the key skills defining investor effectiveness. According to many world-class professional traders, it is one of the most important factors that determine the fluctuations in global prices of all assets on the stock exchange. Any person investing their capital in CFDs or on the stock exchange should understand at least the basic principles that regulate the market so that they can effectively predict price fluctuations. The market analysis is made up of many factors and depending on the category of selected assets, they may be more or less complex, to better approximate this aspect we will use an example.
We will list some of the most important elements that determine fluctuations in forex rates for Stock exchange:
- Degree of currency control
- International situation
- State of the country’s economy
- Demand for foreign currencies
- Political tension
- Monetary policy
Of course, retail investors most often don’t have access to most statistics, which significantly affect currency differences, but by following major international events, you can often deduce upcoming changes. Such an example could be the leaving of the European Union by the United Kingdom (Brexit), which caused the largest drop in the value of the British Pound (GBP) for many years, all investors who correctly predicted such a result of leaving the EU and invested their capital in CFDs by speculate on the collapse of the price of this currency, they earned huge money thanks to the situation. Such cases are very rare, but they can bring unimaginable profit or cause you to lose most of the capital invested. Most brokers offer their own market analysis tools and provide their clients with the most important information from the world of international and stock market policy.
There are many professional market analysis books available for free on the Internet, and you can easily find lectures from economics professors on YouTube that cover all relevant aspects. It is worth spending at least a few minutes a day on improving and developing your skills in this field, because according to world-class investors, the best investment is just investing time in improving your own skills. Market analysis – this is one of the investor’s most valued skills, but it is not essential, and there are often situations where even professionals, despite detailed analysis, make mistakes. This is due to the fact that a significant portion of the shares of various companies, goods and cryptocurrencies are owned by private individuals, and the actions and decisions taken by these people are unpredictable even for the best economists.
Human factor – this is the most important element that determines the most about asset price fluctuations, thanks to which the stock market remains unpredictable and gives profit even to inexperienced investors. A great way that many novice traders use is to watch the moves and actions of the best investors, such people often share their thoughts on the current market situation on social media and can be a great role model for beginners. That’s why people who start the adventure of investing in CFDs or stock market should find on tweeter and facebook the profiles of the most famous foreign investors and regularly review the entries posted by these people.
Imitating the best is one of the most effective learning methods, besides, a very good solution is to join all social groups bringing together private investors. There you can discuss your own thoughts with other users and get valuable advice from more experienced investors, as well as ask for effective and proven strategies for investing with different amounts.
Some transaction platforms allow you to invest in the CopyTrade system, which allows you to accurately copy the activities of the best investors in real time, any amount and accurately imitate all the moves made by the selected investor. A detailed description of this strategy and information about which brokers offer the opportunity to use it when trading CFDs can be found in the Brokers Ranking.