Analysis in CFD Trading

The analysis in online trading is the set of studies that are carried out with the objective of predicting future prices of specific assets. This is generally divided into technical analysis and fundamental analysis:

  • Technical analysis is the study of price charts that can be implemented through the use of technical indicators.
  • Fundamental analysis: it is the study of the context, that is, of the news and data that affect or could affect the price.

To carry out these operations in the best possible way, it is best to operate with a trading platform that allows access to all this data. There are several for different levels of experience. eToro (  access here for free  ), for example, is easier to use and also suitable for beginners. MetaTrader 4, on the other hand, is more complex and therefore more suitable for those who already have experience.

Technical or fundamental analysis?

The distinction of the two approaches should not be misleading, as for online trading and for investing in general, both approaches can be defined as necessary.

In  fact,  technical analysis  allows us to study price movements from a mathematical and statistical point of view, offering us the possibility of obtaining high probabilities of taking advantage of the right moment to start a trade simply by reading a graph and studying the indicators.

The  fundamental analysis  , on the other hand, allows contextualize us price movements in the conditions of the market that can be affected by several factors, which can not be taken into account, and so on of the social events to be kept updated on those that are negotiated or on the general situation of the economy of a country, the community, as well as the international one.

Therefore, given this, one approach cannot be defined as better than another, nor can one approach be chosen over the other. L ‘  technical analysis  , fundamental go “hand in hand” are complementary and well integrated.

The economic, financial, political and even historical / social context is the great parenthesis within which the market moves and therefore also the technical analysis.

Analysis in professional online trading

For professional online trading, which is not just a success and ready, you must always take into account the two dimensions in which you move. For example, if we want to operate with Amazon shares, we must necessarily operate in the following way:

  • In terms of fundamental analysis   : at this level we will have to monitor, for example, the automotive market that interests Amazon, consumer confidence, competition, company plans, any external situation that may affect the action or all the values. index.
  • On a technical level   : in this plan we will have to monitor the Amazon share price chart to identify the moments of potential creation of a trend or a price reversal. The creation of a trend tells us that the price will follow a certain path, while the reversal is the moment when the price reverses its course, a situation that usually occurs in overbought or oversold situations. We will return to these concepts several times in the continuation of our course. We’ll get to the trends shortly with the lesson on double highs and lows.

How to do the analysis with the trading platform

So far we have clarified what technical and fundamental analyzes are and what they are for. But how is analysis implemented in practice in commerce?

As we anticipated in the introduction, these can be implemented directly on the trading platform, such as on  the eToro platform  . 

Fundamental analysis on the trading platform

It is on this platform, which we will use for our example, to access the economic calendar (see figure below).

As shown in the plus500 economic calendar

As you can see, on the economic calendar there are some very important facts for Forex trading. In fact, these are the macroeconomic data, which to be clear includes interest rates, GDP, unemployment, trade balance, and much more. 

To also see the fundamental data that affects individual companies and therefore stocks, you need other platforms such as eToro or  MetaTrader  , which we talked about earlier.

In MetaTrader, in addition to the economic calendar of macroeconomic indicators, there are numerous sources for fundamental analysis of stocks. 

Technical analysis on the trading platform.

As for technical analysis, numerous technical indicators can be applied on eToro by clicking on the 3 dots at the top left of the chart. From the list that appears, you can select various applicable technical indicators with one click. 

technical analysis on eToro

In MetaTrader, on the other hand, indicators are available both in the basic software and practically “infinite” in the “Terminal” section below, from which external sources around the world can be accessed. However, there are already many technical indicators available on the platform that can certainly be sufficient for anyone trading at any level.

The MetaTrader 4 trading platform

Go to the next lesson: Trends, Support and Resistance

Trade Analysis FAQ

What is analysis in trade?

For analysis in trading we can refer to fundamental and technical analysis. Technical analysis predicts future prices based on price charts. Fundamental analysis based on events and macro and microeconomic data. How is the analysis done in trade?

Technical analysis is carried out by studying the charts using indicators. Fundamental analysis is carried out by studying macroeconomic (Forex), budgetary or sector (stocks) data. What are the main indicators of technical analysis?

Among the most important indicators are the moving average, the MACD, the momentum, the relative strength indexHow accurate is technical analysis?

Technical analysis is not an exact science. Interpretations may vary depending on its use and when it is performed. It can offer correct or incorrect signals. For this, it is advisable to seek the confirmation of several signals at the same time.