Forex traders base their trading decisions on either technical indicators on their charts or on the trends in economy. Therefore there are two major way to analyze the currency movement: technical analysis and fundamental analysis.Below are my thoughts and my currency trading tips.
You may wonder which approach of market analysis to take. It is really up to your personality. There are many traders who trade only using technical indicators and think that making decisions based on fundamental factors is not profitable. However there are other traders who may think the opposite way.
Forex traders who use the technical analysis will argue that only chart patterns and indicators will give you the reliable signals by showing you the charts. However those traders who use fundamental analysis can show you how the economic news releases move the price. By knowing the certain fundamental parameters you can predict which way the price will go.
It may seem that fundamental analysis is more reliable. But the technical indicators and chart patterns also give you reliable signals if you learn how to recognize them. Technical analysis is especially valuable when there is no fundamental factors currently influencing the market.
If you use only technical analysis by identifying the technical patterns and not paying attention to the fundamental factors, then any major economic event can move a currency pair against your position. There are indeed some regular economic news releases that can move a currency pair up to 100 pips in a matter of few seconds.That’s the reason why you need to learn Forex trading.
Fundamental news releases not only move the currency pair for very short period of time, very often that strong movement will set the price movement direction for much longer time. Therefore following the local and worldwide economic and political news is the way to predict the currency price movement. However the technical analysis give you the exact points to take profitable trades.
Price movement is never a straight line. Price will go up and down. It’s true that economic factors are behind those movements. But technical analysis can also predict how long the movement of the price due to a fundamental news can last and pinpoint the exact entry and exit points.
That’s the reason why most successful traders pay attention to technical analysis as well as to fundamental one. It is always best to have a balanced approach. Nowadays a lot more traders use only technical analysis. If you one of them at least know the schedule of the major news releases to adjust your trades properly.
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