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Foreign Exchange Market Analysis: Which Type Is More Practical, And The Best Way To Use It In Your Strategy?


There are two kinds of forex market analysis: fundamental analysis, which takes into account economic, social and political forces and how they affect the forex markets, and technical analysis which applies graphs to specify trends and formations in the movement of prices.

So which one is better? If you go to forums and websites you will find many traders vehemently supporting one or the other. Those who like to lean on on graphs will try to convince you that the only method to make profits with forex trading is to identify trends and jump onto them as soon as possible.

On the other hand the advocates of fundamental analysis believe that it is the economic factors that drive the changes in forex trends and this is indisputably correct, at least most of the time. From that position they will reason that any formation you might find on a chart are nothing more than coincidental.

But logically this does not certainly follow. Even though economic changes have a enormous influence on the foreign exchange markets, it may still be possible to detect patterns in the way that the markets move after an announcement or in times when there are no major announcements.

If on the other hand you lean merely on your graphs, you can probably be caught out when an important market event such as an interest rate change is unexpectedly announced. If you were not paying attention to the market news and left a trade open at the wrong side of the market, that could cause 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 usual patterns that can be identified in the short term. Finding these formations and trends, while monitoring the economic and political news, is the right way to forecast future trend changes. And foreseeing future price movements, obviously, is the way to make money with currency trading.

Forex 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 currency trading it is better not to allow your attention to become fixed on either one. You have to learn to balance the use of both types of currency market analysis to make consistent profits.
The best tool to find out whether an analysis is correct 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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