Sunday, February 25, 2018

Forex Trading Basic: Two Types of Trading Analysis

December 5, 2009 by  
Filed under Basic Trading Analysis, Forex Strategy

Basically there are 2 type of analysis you can take when approaching the forex:

  1. Fundamental analysis

  2. Technical analysis.

In my personally point of view, knowing and understanding both of these analysis are important. There may be a lot of debate and discussion about which is better, which is analysis can generate more money. However, the truth is, both of these analysis are inter related. Let’s look at both of these analysis.

Fundamental Analysis

Fundamental Analysis gives you information about the forex market by:

  • economic forces (for example, Gross Domestic Product)
  • social forces (for example, religion and culture)
  • political forces (for example, change in policy or change in trade law)

These 3 forces affects the supply and demand of the currency exchange.

These 3 forces also inform us which country’s economy is doing well and which is not. Once the economy of the country is doing good. The more confidence banks and other countries will have on that country’s currency.

In simple terms. The better the economy of a country, for example USA, the value of US dollar will improve. It is true if the country’s economy is terrible, the value of that country’s currency will drop.

Technical Analysis

Technical analysis is the studying of price movement using charts.

By gathering information on past price movements, and use some calculations, Technical analysis can predict accurately where the price will move on to.

Many have said that trend is your ally. The reason is once you found a trend, just trade in the same direction.

In other words, Technical analysis can help you recognize these trends as soon as possible and provide you with very profitable trading opportunities.

Learn both Analysis

Technical Analysis could help you earn a lot of money. It is the money earning skill for Forex Traders. However, with Fundamental Analysis, you earn a foresight to know what are the odds the currency is going to change. Something that Technical Analysis can’t produce.

FX Market is very unpredictable. It is only through learning these two type of analysis that can help you reduce and earn a lot of money in this exciting and profitable market.

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