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Currency Exchange Market Analysis: Which Type Is Better, And The Right Way To Apply It In Your System?
There are two kinds of forex market analysis: fundamental analysis, which considers economic, social and political impacts and which way they influence the foreign exchange markets, and technical analysis which applies graphs to specify trends and formations in the movement of prices.
So which one is better? If you visit forums and websites you can find a lot of traders strongly argumenting for one or the other. Those who like to depend on on graphs will try to persuade you that the only method to make money with currency trading is to spot trends and jump onto them as early as possible.
However the advocates of fundamental analysis are convinced that it is the economic factors that drive the changes in forex trends and this is undeniably correct, at least most of the time. From that position they will reason that any patterns you might recognize on a graph are nothing more than coincidental.
But logically this does not inevitably follow. Even though economic shifts have a tremendous influence on the foreign exchange markets, it may still be possible to detect patterns in the way that the markets react after an news release or in times when there are no important announcements.
If on the other hand you depend exclusively on your graphs, you can probably be caught out when an important market event such as an interest rate change is suddenly released. If you were not monitoring the financial news and left a position open at the wrong side of the market, that could lead to a catastrophe.
So the final conclusion is that there are economic events behind the larger scale rises and falls in the market, but there are also typical formations that can be spotted in the short term. Finding these patterns and trends, while following the economic and political news, is the optimal way to forecast future trend changes. And foreseeing future price movements, of course, is the way to earn profits with forex trading.
Currency market movements are a little like elastic that can expand in one way or another and then fall back, although not always to its starting position. The fundamentals are the forces that cause it to expand. Technical analysis foretells how far it will go in each direction before turning around.
So when you want to profit from forex trading it is better not to allow your attention to become fixed on either one. You should learn to balance the use of both kinds of foreign exchange market analysis to make consistent profits.
The best tool to find out whether an analysis is right or not is using forex trading signals. If you can find a good forex signal provider, whose accurate forex signals are in agreement with the analysis, then you can bet on what you read.
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