Market Analysis and Risk Management for Home Traders

If you already do some form of earning or work-from-home program, you’ll understand the freedom of making money from the comfort of your home without going out daily. Home traders trade various financial markets and can profit from predicting price movement and entering trades.

Trading From Home

Many home traders use mobile devices or computers to access global markets and can easily analyse charts from anywhere. Market analysis and risk management are two essential skills to succeed at trading forex. The analysis identifies chart patterns and price history to predict price movements. Risk management involves planning trades to maximise their trading returns and reduce exposure to market volatility. These are usually part of beginner training lessons, but traders keep updated throughout their trading career.

If you trade any financial market from home, you have learnt market analysis and developed a strategy to manage your trading capital. This article will help refine your analysis process to become a better trader.

Market Analysis

Financial market analysts study price history to understand trading instruments’ behaviour and predict where price moves next. Market analysis is based on the assumption that price moves in patterns similar to previous movements and responds to market factors similarly. Based on this, there are two main ways to analyse markets: technical and fundamental analysis.

Technical Analysis

Technical analysis only considers price movement on charts and other characteristics such as volume and momentum. Technical traders do not often consider the news that impacts the market when trading but note important events that can change traders’ sentiments. Some technical traders are so-called “pure price action” traders who do not use technical indicators, but most technical traders use one or more indicators to improve their analysis.

Indicators are technical tools that use preset mathematical formulas to track price changes, predict future prices, and indicate such parameters on charts. There are various indicators, ranging from volume and momentum indicators to volatility and trend indicators.

How to Perform Technical Analysis

  1. Learn the basics of technical analysis, such as resistance and support, supply and demand zones, charts and patterns, and how prices are formed using candlestick charts.
  2. Get comfortable using charting and drawing tools.
  3. Identify the market and instrument you want to trade.
  4. Identify and mark important price areas, such as support and resistance levels and breakouts.
  5. If you use indicators, ensure they have the correct parameters and add them to your charts.
  6. Identify the market trend (bullish, bearish, or ranging) to know where to enter trades.
  7. Backtest your analysis on historical data to find what works best for you based on your trading strategy.

Fundamental Analysis

Fundamental analysis considers important events and data that drive trading behaviour. For example, the currency market is often volatile following monetary policy announcements. Positive news often triggers bullish trading behaviour, while negative news does the opposite. Fundamental traders trade positions based on their prediction for market response. For example, a fundamental trader may short the GBP if the Bank of England announces a drastic reduction in interest rates.

Analysing the market this way has merits and demerits, so home traders must carefully consider their options before using either method. One of the crucial factors to consider is the compatibility with trading strategies. If you trade breakout strategy, for example, fundamental analysis may do you little good. Still, technical analysis will help you identify important support and resistance levels from which the price may break out.

Risk Management

Trading involves using capital to buy into or sell instruments without owning the underlying assets. Like other forms of investment, traders must manage their capital properly to get more returns and reduce the exposure to negative volatility. Risk management refers to how traders achieve this using various tools and strategies. Some of these strategies are:

1.   Take Profit (TP) and Stop Loss (SL):

TP and SL are orders that traders use to automatically close trades when the price gets to their preferred level. TP and SL help traders get their target profits or risk appetite.

2.   Lot Size Management

Lot size management is an important risk management strategy. Traders are often advised to use about 2% of their portfolio per trade to reduce potential drawdowns if the market goes in a different direction.

3.   Trading Psychology

How traders think and manage their emotions impacts how they respond to challenges and market changes. Risk management begins with having the right mindset about managing drawdowns and trading appetite.

4.   Diversification

Portfolio diversification means spreading your trading capital on various markets or assets to manage risk. One way to do this is to divide your capital for long-term and short-term trading or investments into highly volatile and moderately volatile assets.

These strategies will help refine your trading process to manage your capital better and maximise each trade. Never trade with having a risk management strategy, and be sure to follow your strategy always.


Technical and fundamental analysis helps traders identify potential entry and exit when trading and helps them with their risk management strategy. As a home trader, you can spend more time analysing to make trading easier. As professional traders say, study hard and trade easy! Trading from home or on vacation can be as fun as having a professional trading career; the principles are the same!


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Lynn Beattie

Aka Mrs MummyPenny

Personal Finance Expert

I write about personal finance made simple, lifestyle choices that will save you time and money, as well as products and services that offer great value.

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