The idea behind forex predictions is to use available information to forecast a forex rate in the future. There are two main approaches to how predictions are made: technical and fundamental approach.
The methodologies that are used to make these predictions form also the basis for most of the trading strategies and systems out there and have similar strengths and weaknesses.
No prediction system will work perfectly and historical accuracy is no guarantee that a system will work in the future.
Forex Predictions – Fundamental Approach
FX predictions using fundamental approach try to make forecasts on forex rates and trends based on fundamental economic variables.
These economic variables include, for example, consumption, savings rate, trade balance, opinion surveys, stock prices, and so on.
There are two main ways to use analyze these variables. The first is to use econometric approach, which uses mathematical equations, and the second is judgmental approach, which uses personal opinions on what the current data means from the FX prediction perspective.
Forex Predictions – Technical Approach
The technical approach uses a smaller sample of data available. For example, the analysis might involve only the historical closing prices of the currency pair.
Within the technical approach, there are several models to do the analysis with. For example, “chartists” look at the patterns in forex charts and make predictions based on meanings of the current patters.
Others, such as some momentum-based models, use statistical analysis to derive forecasts based on the relation of short-run and long run moving averages of the forex data series.
Forex Predictions – Providers
To start receiving forex predictions using either fundamental or technical approach, look up companies selling their analysis.
The dominant form of analysis sold on the web uses the technical approach. Some of the companies selling their analysis include Investica, AlarmTrades, and Technical Research Limited.
For fundamental analysis, the best sources include big information providers, such as Reuters, and investment banks, such as Barclays or Citigroup, that have legions of analysts producing analysis primarily based on the fundamental approach.
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