Forex Prediction

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.
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

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.