KUALA LUMPUR, MALAYSIA  - 30 November 2024 - Before entering the market, traders need to identify potential price movements to avoid ad hoc trading decisions. Otherwise, they increase risks and merely rely on luck. For instance, gold recently declined below $2,600 per ounce, marking its lowest point since mid-September 2024 as a strengthening U.S. dollar put pressure on traditional safe-haven assets.

This movement was driven by broader economic shifts, including expected fiscal and monetary policy adjustments following Trump's election victory, with further implications for inflation and interest rates. As traders weigh these potential changes, they can recognise market patterns and adjust their short and long-term strategies accordingly. Octa's financial market analyst Kar Yong Ang shares tools and approaches for beginners to monitor and analyse potential price movements.

Effective methods for tracking asset's price

Analysing the market and assets' prices is time-consuming. Traders monitor the graphs and follow economic and political news to identify where the price is about to move. However, beginners may spend too much time trying to validate their trading assumptions. Eventually, they may either hesitate a lot and miss an opportunity or hasten and increase the risks without proper analysis.

Here's where advanced tools come into place to facilitate the process. For example, one can set up price alerts to avoid spending hours in front of the monitor and simply get notified when the price approaches a specific level. More advanced tools like AI-powered bots may suggest potentially profitable trades or assets, break down trading sessions, and provide constructive, impartial feedback.

How to analyse an asset: technical and fundamental analysis breakdown

To analyse potential asset's price, traders can study the technical patterns and the broader economic context behind them. In other words, technical and fundamental analysis should be applied.

Technical analysis for beginners

Technical analysis uses historical price data to forecast future price movements. It typically begins with identifying the overall trend (whether up, down, or sideways), followed by establishing key levels where the price might reverse or consolidate: support and resistance. They act as significant price points where traders expect the asset's price, for example, to stop or reverse, making them critical for planning entry and exit points. Various indicators like Moving Averages (MA), Relative Strength Index (RSI), Bollinger Bands, and Average True Range (ATR) are also applied to confirm the trend or level, as well as better predict potential price direction and targets.

To avoid confusion, beginners can rely on support and resistance levels only to identify potential price targets, hence, entry and exit points. Many use the range trading strategy, which is based on the expectation that the price bounces off the established support and resistance levels:

* The support level serves as a potential point where the downward trend may stop due to the concentration of buying interest. Typically, traders open buy-deals when the price reverses off the support level.

* The resistance level serves as a potential point where an upward trend may halt since there is an increase in selling pressure. Traders commonly sell assets around these levels.

Suppose a trader identifies current support and resistance levels when analysing gold prices as 2,546 USD and 2,588 USD, respectively. Since the price broke below the 2,588 USD level as part of a bearish wave, a trader waits as the price approaches the 2,546 USD support to decide. If the price reverses, it may be a signal to open a buy trade, with take-profit placed around the resistance zone. In the case on the graph, the gold price bounced off the support, resulting in two green candles when writing the material.

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Suppose the price breaks the resistance and maintains its position above, then a trader may expect it to reach the next resistance of 2,604 USD.

Fundamental analysis for beginners

Fundamental analysis evaluates broader economic factors, such as interest rates, inflation, fiscal policies, and geopolitical events. These factors affect asset values: for instance, a strengthening U.S. dollar often exerts downward pressure on commodities priced in dollars, like gold. Recently, gold experienced its steepest weekly drop in over five months as the dollar surged amid economic shifts, leading investors to reassess the metal's appeal as a safe-haven asset.

As Trump's second term unfolds, his administration's fiscal policies, including potential tariffs and adjustments to immigration, are expected to shape both inflation and investor sentiment significantly. The heightened prospect of tariffs on imports could spur inflationary pressures, potentially prompting the Federal Reserve to reassess its rate policy. Should inflation rise, the Fed may delay any planned rate cuts, which could increase interest rates, bond yields, and deposit interest rates. In this scenario, the gold's price is likely to decrease because the opportunity cost of holding gold in portfolios increases.

Combined analytical approach is a win-win

Combining technical and fundamental analysis provides a more comprehensive understanding of market conditions, enhancing the accuracy of price analysis. Technical analysis focuses on historical price patterns and statistical indicators to predict potential price movement. At the same time, fundamental analysis evaluates broader economic factors, such as inflation rates, geopolitical events, and monetary policy shifts, that may ramp up or drop asset prices. Combining both allows traders to see a broader picture and take into account all factors potentially affecting an asset's value.

For example, if technical analysis shows that gold is nearing a support level, a trader might look to buy if the price reverses off the level. To validate the assumption, one examines global economic data or recent policy changes to gauge whether market conditions support a potential reversal at that level. Traders not willing to spend hours monitoring the market can use solutions like Space by OctaTrader, which offers timely and personified analytical posts from Octa's experts with trading ideas relevant to their trading style. Such an approach creates a more robust strategy, enabling traders to align technical signals with economic trends and reduce the risk of relying on a single analytical method.

Tracking an asset's price is essential for developing a disciplined trading approach. Beginners should carefully rely on data to forecast market behaviour, grounding predictions in trustworthy information rather than speculation. Making impulsive decisions won't help to develop expertise and succeed in the long term. Hence, traders should double-check their decisions, looking for additional proof of a certain trading assumption. Those who lack practice can use demo accounts to test their strategies without financial risk. At the same time, such an approach helps to build confidence before trading with real money.

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