Defining the Better Form of FX Analysis
Fundamental and technical analysis are the two main mechanisms used in the foreign exchange market.
1. Fundamental analysis takes into account economic, social and political elementsand how they affect the currency markets.
2. Technical analysis utilizes charts to find out trends and patterns in the change of prices.
Choosing one over the other is not obvious. A cursory surveying of foreign exchange trading related forums and websites show traders being staunch advocates of either one of these approaches. Those who choose technical analysis contest that graphs are the only style that can predict way ahead of time the trends which is important to making a profit in trading.
Conversely the proponents of fundamental analysis will defend that it is the economic factors that drive the changes in currency prices and this is unquestionably true, at least most of the time. From that spot they will justify that any patterns you might find on a chart are nothing more than coincidental.
But rationally this does not necessarily happen. Even though economic changes have a massive significance on the currency markets, it may still be possible to determine patterns in the way that the markets react after a new information or in times when there are no major information.
One forwarning for the technical analysis loyalists is that there is a probability that they will be caught unawares should interest rates suddenly change. If the trader does not read the news then there is a big probability that they will make a bad trading call. This can end up in a major trouble.
So the sum and substance is that there are economic happenings behind the larger scale rises and falls in the market, but there are also ordinary patterns that can be recognized in the short term. Discovering these patterns and trends, while keeping one eye on the economic and political news, is the best method to predict future price movements. And predicting future price movements, obviously, is the way to make money with currency trading.
Markets are sometimes delineated in terms of elasticity as they can move in either direction and fall back to their original or another position. The aspects that stretch the market are the fundamentals of socio-political and economic forces. How much it will stretch and where and when it will reach is the area of technical analysis.
Therefore you would be well advised not to be a loyalist in either form of analysis. Sizable returns are realized better when fundamental and technical analysis are combined together. - 23218
1. Fundamental analysis takes into account economic, social and political elementsand how they affect the currency markets.
2. Technical analysis utilizes charts to find out trends and patterns in the change of prices.
Choosing one over the other is not obvious. A cursory surveying of foreign exchange trading related forums and websites show traders being staunch advocates of either one of these approaches. Those who choose technical analysis contest that graphs are the only style that can predict way ahead of time the trends which is important to making a profit in trading.
Conversely the proponents of fundamental analysis will defend that it is the economic factors that drive the changes in currency prices and this is unquestionably true, at least most of the time. From that spot they will justify that any patterns you might find on a chart are nothing more than coincidental.
But rationally this does not necessarily happen. Even though economic changes have a massive significance on the currency markets, it may still be possible to determine patterns in the way that the markets react after a new information or in times when there are no major information.
One forwarning for the technical analysis loyalists is that there is a probability that they will be caught unawares should interest rates suddenly change. If the trader does not read the news then there is a big probability that they will make a bad trading call. This can end up in a major trouble.
So the sum and substance is that there are economic happenings behind the larger scale rises and falls in the market, but there are also ordinary patterns that can be recognized in the short term. Discovering these patterns and trends, while keeping one eye on the economic and political news, is the best method to predict future price movements. And predicting future price movements, obviously, is the way to make money with currency trading.
Markets are sometimes delineated in terms of elasticity as they can move in either direction and fall back to their original or another position. The aspects that stretch the market are the fundamentals of socio-political and economic forces. How much it will stretch and where and when it will reach is the area of technical analysis.
Therefore you would be well advised not to be a loyalist in either form of analysis. Sizable returns are realized better when fundamental and technical analysis are combined together. - 23218
About the Author:
Forex trading requires understanding to be a successful forex trader. To trade forex effectively you must understand forex trading strategy to keep up with it all.
posted by X - Men @ 4:22 AM
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