Money & Finance
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Dwayne Buzzell

Importance of financial analysis in trading commodities and fx trading

Trading the financial instrument in real time market is an extremely difficult task if you are relatively new in the financial world. There are any new traders in the industry who jumps into the world of the online financial instrument and incur hugely loses in the market. Most of the rookie trader in the financial industry fails because they don’t know how to do the financial analysis properly. Even there are many CFDs trader who trades the live market without having prior knowledge about the associated risk in trading. Statistics suggest that out of 100 trader’s only 5 trader’s care making consistent profit in CFD trading. If you truly want to become a successful commodity or forex trader then you must have a strong foundation in the financial analysis section. In this article why the financial analysis is so important in the online trading world.

What is financial analysis?

Financial analysis is the study of the strength of certain assets in the financial market. It allows the trader to evaluate a certain asset from various perspectives in order to determine its performance and suitability.to be precise financial analysis is the study of the financial instrument both fundamentally and technically which allows the researcher to come to a conclusion about the strength and near-term performance of certain assets in the financial world. Most of the traders focus on important financial factors like financial performance, income statement, balance sheet and cash flow statement in their financial analysis assessment.

Technical and fundamental analysis

Most of the professional traders use the commodity trading platform in their technical analysis. And they use different online news site published news for the fundamental analysis. On the contrary, in currency trading, professional traders use currency rates live chart available in the mt4 platform for their technical analysis. Once they successfully complete their technical analysis they go for the fundamental sectors. In the eyes of trained professional such a combinational approach of technical and fundamental analysis is termed as financial analysis. If you truly want to become a successful trader in the financial world then there is no another alternative other than learning the financial analysis perfectly. Those who are successfully trading the live currency rates and CFDs in the market have gone through extensive learning procedure and now they have mastered the art of financial analysis. If you truly want to become successful in this industry then you must be successful learn the method of financial analysis

Financial analysis in forex trading

Trading the different financial assets in the forex market is an extremely difficult task if you are relatively new in this industry. Those who are successfully trading the forex market for a long period of time, have developed strong fundamental and technical analysis skill. As a professional forex trader, you must learn every single bit of details available in forex learn Centre. Most of the novice trader in this industry fails to make a consistent profit due to their lack of knowledge in this industry. For instance, a currency pair might exhibit strong bearish move in the market but fundamentally it might not be weak. In such scenario, professional traders avoid taking trade in the market due to the conflict between the technical and fundamental analysis section. On the contrary, the novice trader who is only relying on the technical or fundamental analysis execute their order in the market and incur a heavy loss. To be precise both technical and fundamental analysis is extremely important for forex trader since it helps allows them to execute perfect orders in the market.

Financial analysis in stock trading

Financial analysis is extremely important for the stock traders since most of the best trades are taken in the stock market based on financial analysis. It’s true that you can make a decent amount of profit by trading the live currency rates in the forex market. But in order to make a decent amount of profit in the forex market the trader must have a strong foundation in the financial analysis section. This will allow him to know the current performance and key economic parameters of a certain stock in the market which will ultimately create an illustration about the next move of the stock in the market.

Proper risk management

Trading the financial assets in the financial world is extremely difficult and requires perfect execution of the trading plan. Without following proper risk management factors you can expect to make a consistent profit in the forex market. Most of the novice traders in the financial world cut their winning trades early in the market and let their losers run long. But in reality, as a professional trader, you must ensure that your winners are always bigger than you loses. Don’t get carried away with your emotions after incurring one or two losses in the market. Even the most successful traders in the world have losing months in the year. So as a professional trader you must focus on your long-term performance.

Summary

If you truly want to become a professional trader then there is no another alternative other than learning the financial instrument properly. Financial analysis is such a unique skill which helps the traders to take the best trade in the market out of extremely difficult market conditions. It’s true that you can’t master the art of financial analysis in few weeks or single months. As a trader, you must spend quality times in practicing your trading strategy and learning the different important factors of the economic world. Financial analysis is nothing but the advanced combination of technical and fundamental analysis. So if you have a strong understanding of the technical and fundamental analysis then you can easily master the art of financial analysis.

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