Why is analyzing the market essential for all traders?

When it comes to trading on the world’s financial markets, there are many ingredients for success. From using an effective trading plan to keeping a trading journal, there are lots of things that should be part of your daily routine. One big part of any trader’s tool kit should be keeping up to date with the current market news and price action to then analyze it further.


What is market analysis?


Before we look at why every trader should analyze the market, it is worth looking at what it involves. In simple terms, it is looking at the current news and chart information to see what is going on and what this might mean for the future.


Broadly speaking, there are two forms of analysis that you can perform. The first is called fundamental analysis, which is using purely the news and economic data from countries or companies to see what is going on. The second is technical analysis, which is using price action on the charts and technical indicators to get a feeling for what is happening.


Why should you use market analysis as a trader?


If you still are unsure as to why you need to make market analysis part of your daily routine, then here are some great reasons:


  • Helps you to find opportunities – however you choose to analyze the market, it will help you to spot any new opportunities to take advantage of. If you do not perform this kind of investigation each day, then you may well miss out on winning trades or lucrative opportunities in the long term.


  • Helps to manage your portfolio – a big part of trading is looking after the trades you have open. Performing market analysis will help you to see where the markets are at in relation to your open trades and whether you need to take action. This can save you lots of money in the long term compared to shares dropping without you realizing it.


  • Continuing education – another great reason to study the markets each day is to continually keep learning. You will get more used to spotting patterns and how different news affects the markets. It is vital to always be learning as a trader as this will make you more successful in the long run.


How can you get more information to analyze?


Information is essential for all traders, so getting as much of it as you can to look at is worthwhile. As well as the general news sites and your charts, many pro traders will also use paid news feeds. The Hammerstone stock analysis is a popular service in this vein that gives you extra news and tips on opportunities within the markets and advice on important upcoming events to know about.


Analysis is your secret trading weapon


If you are trading already, then you need to be conducting market analysis as your first job each day. Once you have done this, you can use your trading plan to see if you need to exit any open trades or enter into new ones. This is a key ingredient for trading success and one that cannot be overlooked.




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