Sentiment Analysis
The price movement of an underlying financial asset reflects the general opinion of all market participants. This collective sentiment is called market sentiment. It refers to the shared attitude of market participants toward risk. In an uptrend, the price of the underlying asset tends to rise; in a downtrend, it tends to fall. The primary tool for analyzing sentiment in financial markets is the Commitment of Traders (COT) report, published weekly by the U.S. Commodity Futures Trading Commission (CFTC).
Fundamental Analysis
By definition, fundamental analysis is the study of the economic, social, and political factors that influence the supply and demand for an underlying financial asset. In short, while technical analysts seek to understand “when” an asset’s price fluctuates, fundamental analysts seek to determine “why” that price fluctuates. Their primary method of trading is to follow the economic calendar to identify major economic events and press releases that may influence the price of their preferred assets.
Technical Analysis
By definition, technical analysis involves predicting the future price movement of an underlying financial asset based on its past performance. Fundamentally, technical analysts believe that “history repeats itself,” and therefore, the price chart is their best ally. Techniques used by technical analysts include following chart patterns, such as the head and shoulders pattern, and using mathematical indicators, such as moving averages and stochastics.
Economic Calendar
The global economic calendar includes recurring financial events that impact financial markets. Experienced traders anticipate these events and plan their trades accordingly. Each of these events can cause fluctuations in the value of various instruments, usually on a smaller scale.