Fundamental and Technical Analysis Forex traders

December 16th, 2007 expert Posted in FOREX TRADING STRATEGIES and CONCEPTS |

Trading concepts: Fundamental Analysis,  Technical Analysis, Trading Calender

Traders fall into two schools when it comes to ways to analyze the market and find trading opportunities. There are trades that use mainly fundamental analysis (news and events and reltive strength of currencies) and those who use technical analysis(Charts reflecting the historic movements of currencies). The fundamental analyst concentrates on the underlying causes of price movements, while the technical analyst studies the price movements as reflected on the chart.

Technical Analysis
• Technical analysis focuses on the study of price movements. Historical currency data is used to forecast the direction of future prices. The premise of technical analysis is that all current market information is already reflected in the price of that currency; therefore, studying price action is all that is required to make informed trading decisions.
• The primary tools of the technical analyst are charts. Charts are used to identify trends and patterns in order to find profit opportunities.
• The most basic concept of technical analysis is that markets have a tendency to trend. Being able to identify trends in their earliest stage of development is the key to technical analysis.

Fundamental Analysis
• Fundamental analysis focuses on the economic, social and political forces that drive supply and demand. Fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment.
• However, there is no single set of beliefs that guide fundamental analysis. There are several theories as to how currencies should be valued.

Technical Analysis or Fundamental Analysis?
• Most traders abide by technical analysis because it does not require hours of study. Technical analysts can follow many currencies at one time. Fundamental analysts, however, tend to specialize due to the overwhelming amount of data in the market.
• Technical analysis works well because the currency market tends to develop strong trends. Once technical analysis is mastered, it can be applied with equal ease to any time frame or currency traded.
• Technical analyst traders can not however ignore the fundamental aspects of trading as they must know the times of important economic announcements as these times represent higher risk conditions.
• Fundamental analyst need technical analysis to get an optimum entry into the market.
• On the whole traders should be able to trade in both ways as fundamental information generally creates the reason for a trend and technical analysis provided the way to best benefit from these trades.

For more information on fundamental and technical trading please go to:-

http://www.financepoint.net/intro-forex.asp

http://www.easy-forex.com/en/Forex.forecast.aspx

http://forex.easy-forex.com.au/learn_fx_trading/technical_analysis/

http://www.internettradebureau.com/article/forex-trading-an-a249.html

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