Forex Trading Strategies – Part 1

When handling Forex, there are basically two types of analyses you can take.

Two Types of Trading:

■ Fundamental analysis
■ Technical analysis

Fundamental Analysis

This is basically a way of looking at the market by considering the country’s socio-economic factors that influence the demand and supply of that country. In simpler terms, you look at whose country’s economy is good, and whose is not. This is due to the fact that if the country’s economy is doing well, then more countries will have confidence in that country’s currency.
An example of this is the prominence of the U.S. dollar. Since the economy of the United States is progressing, so are the interest rates to manage price increases. As a result, the value of the U.S. dollar continues to increase as well. That is chiefly what fundamental analysis is all about.

Technical analysis is primarily the study of how price moves. You can actually sum it up in a single word – charts. The basic idea is that one can review the past price movements, and, based on the action of the price, be able to establish at some point where the price will go. By studying the charts, you would be able to spot patterns and tendencies, which can aid you in discovering suitable trading opportunities.
Keep in mind that the most important thing you ever need to learn and understand is the trend. There is a great probability for you to make money when you can spot a trend and trade in one direction. With technical analysis, you will be able to recognize these trends even at their early stages and hence, help you find very lucrative trading prospects.

Which Type of Analysis Is Better?
As you continue your journey as a Forex trader, you will discover strong supporters of both fundamental and technical types of analyses for Forex trading. You will meet some who would argue that the fundamental analysis is the only type that should be studied because they believe that only the fundamentals direct the market flow and that patterns found on graphical charts are plainly coincidence or strokes of luck. Likewise, there would also be individuals who would insist that by paying attention to the charts, one would discover a lot of patterns that can then be used to predict future price actions and movements, thus, assisting you in finding trading opportunities that are suitable for you.