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There is no hard and fast rule on whether to use fundamental or technical analysis when it comes to forex trading and analysis. There are good things to be said about technical analysis and there are equally good things to be said about fundamental analysis. I think that a persons preference aligns with certain other preferences and probably align to whether you are a right brain thinker or a left brain thinker and as is often the case with such things you just need to firstly understand the differences between them to be able to make a choice in what you might use.

I myself prefer to use primarily technical analysis. With Forex of course no amount of technical analysis will provide any answers to what amounts to a trading halt, that is the market trading sideways prior to some major point of fundamental interest such as an election an interest rate change or debt announcements etc that alter the course of the markets.  All the market indicator tools around are primarily about technical analysis and metatrader has some great parts for this.

For fundamental analysis on the forex market you need to have a clear understanding on the relationship of interest rates and all other fundamentals that might affect the movement of a currency pair. What does a rising interest rate in Japan or Australia have on currency movements. What is the likely attitude of the market to a change of government at the upcoming election.

Technical analysts don’t need to so strongly know about the impact of these fundamental events however  the technical analyst does need to be aware that such events are most likely to create trading opportunities and be on the lookout for the signals that say game on. What the  technical analyst needs to do is find the opportunities by monitoring the graphs to find when price movement is to occur. A technical trader should not go into the market until a trend has formed alleviating the number of time when the market fails to move from the news or worse takes a temporary opposite position that activates a stop loss. Use what was Warren Buffets share trading strategy to take small but almost guaranteed successes rather than speculating with larger opportunities that might go bad and damage your capital.

From this one can conclude that neither is right, but how our brains think will probably guide the best choice. One thing to keep in mind is that a trader that is versed in both techniques of analysis and is able to separate what choices have been made with a trade in the market will likely be a very successful trader. If you choose to take a trading position with fundamental analysis don’t second guess yourself with technical analysis  and vice versa.

Now as you get started in your quest to develop your skills as a forex trader one of the  things you will be tempted to do is to change around the time frame you use for trading. For example you might want use the 15 minute time frame for conducting your technical analysis in the market. This is fine and really depending on your strategy you can choose to use a number of different time frames. So back to our example you have started out analysing the market at the 15 min time period and then you have decided there is an opportunity in the market.

You enter a trade with your broker and it all appears to be going OK. You expected the market to go up and it has been, but it hasn’t really gone as far as you might have liked your profit is very small and surely based on your research it will travel higher. It has now in fact appears to have turned against your proposed trade and you are looking likely to lose money on this deal. So you now choose to change your time period for the trade to a 5 minute interval, it seems reasonable you don’t have a close enough view with a 15 minute interval. The market now looks OK, it even appears like it might or has turned up again  a small spike occurs in the market, but these are fleeting and difficult to catch. but you breathed a slight sigh of relief. You can now be happier. Then it appears that the market is turning down again and well it looks kind of strange, as the fall seems quicker and larger. Your perception of the market behavior is altered to how you originally decided to take your market position. Of course you could take the other tack and move the time frame out looking also to save a falling trade looking for a longer term downside.

Many of these will end up with a margin call situation and disaster is not culled. This is a difficult idea for some new traders to swallow and will be a hard lesson learned by some.  s trade that is taking you negative is  a bad trade at the best of times an learning to close them out early and take a small loss is a clever trading tactic

Happy trading

Peter

Many new forex traders go into the market with the idea that technical analysis done right like the text book tells them is just about the same as the holy grail. It is just what you do. Well I will tell you now, that you will most likely loose a significant amount of money if you do just that.

Firstly let us get something very straight. Technical Analysis is a backward looking analysis. The process involves analyzing events already gone. Now behavior being what it is means that past behavior generally sets some predictors. Lets say that again “Past behavior generally sets some predictors”. You got that. You see what you are saying is based on a historical perspective the mob rule of a lot of people doing things together makes likely behaviors to happen across the collective markets. These indicators give a feel for the markets direction of movement.

Scenario

The market has moved up to a threshold at which your technical analysis suggests a turn is imminent. The trader takes a sell as the next direction is down. Along comes the government and raises interest rates a bit unexpected and the market continues to rise. The indicators of you were reading them suggested that it might turn, but it also indicated that the forex traders had left the floor, no one was in the market on that pair, it was becoming relatively illiquid. Don’t be the brave one and go in, wait until the market sets the new direction.

There are some who believe that the currency pairs are pushed around by banks working as a collective. I know the banks have to move a lot of funds. They also have to at times find a lot to get a deal for a large corporation moving. Ever purchased some heavy equipment to start a mine. Those guys need a huge amount of a currency to fund the purchase of equipment. Not enough banks from around the world could collectively agree on exactly the currency movement that was to be produced. Therefore some banks will have to loose out if they are not part of the collective and what does one have to do to get in.

Scenario

A trader analyzes the market, the market is rising on this pair, it looks like a buy position. The thing that the trader hasn’t noticed is the dwindling volume in the market the trades are leaving the market on this one. Sorry it looks like you are approaching a peak in the market. The market may get news that continues its climb. It is also reaching a point where it might take a tumble.

Many new forex traders show who are using technical analysis overload their indicators. Don’t even bother! I keep it reasonably simple. I only use candlestick charts. I only use MACD and simple moving averages at 5 and 25 to analyze the market. Your mind may better understand other indicators. That is fine use them if you feel more comfortable. These are the ones I know and understand best.

So when your technical analysis of the forex markets shows that the MACD and your candlestick and moving averages comes out that you should buy on a currency pair. Stop take a breath, pause and ask yourself this. Is there a fundamental force that is telling you that the masses might just have it wrong on this occasion. Perhaps the technical analysis would be fine for Please do this for me before you trade it will help you stay ahead of the game.

This week Order Generic Female Viagra Online without Prescription saw the US dollar under renewed pressure. Initially analysts considered the week to be one that would see the dollar pull out of its slump, however the data doesn’t seem to have had any effect. Some analysts are of the belief that their is downward pressure on the US dollar due to the high levels of debt, it may be the only thing to explain its fall. The dollar has slid through the resistance at 1.50 and has also been under pressure elsewhere. The Aussie has pushed through 93 testing the waters on at least one occasion this week. A continued flight to commodities and riskier asset classes is driving the US dollar lower. Now this is having some impact on China. Its exports the Europe are getting cheaper, but importing anything from Europe is getting more expensive. US prices remain the same due to the yuan currency peg and others with free floating currencies are seeing Chinese imports getting cheaper in local terms. The lower US dollar is impacting export trade from Australia and others due to the appreciation of their currency.

Expect further downward pressure and watch testing of the Euro at a number of spots above 1.50. If it gets through to 152 then it will be pressuring major resistance at 1.53 which is where it reached in 2008.

Happy Trading

Forex Admin

Are you new to forex? What is forex? The term is the shortening of the two key words Foreign Exchange which is the trading of currency across national borders. For example if you have travelled overseas or bought something from the internet in a currency other tan your own then you have been party to Foreign Currency Exchange. You see your credit card issuer now has to buy the foreign currency to cover your transaction. Now each day over a trillion dollars are part of foreign currency trading. So why is this of interest well foreign currency rates vary each day, banks and currency traders often set a day rate for you to buy or sell your currency when you want to purchase it for say usage on an overseas trip. The rest of the time the real rate of the currency moves up and down continuously. Places like Oanda and XE are able to provide current market rates and provide some foreign currency services, for business and individuals.

As the market moves during the day there is the opportunity to buy or sell currencies based on whether they might rise of fall in relation to another currency. All currency is traded against the US dollar although currencies are shown with direct rate relationships or as the market term they are traded in pairs. For example to find out what is the current exchange rate for Singapore dollars to Australian dollars I can check out a currency trading site such as XE and then use that to find out the rate. However that rate is calculated by the rate of Singapore dollars to US Dollars and the Australian Dollar to US dollars.

This also opens a place for anomalies to occur that can be exploited and that is where the rate quoted for a direct exchange differs from that going via the US dollar conversion. So the main reason for doing this unless you are looking for some sort of market protection is to make money by identifying correctly those currencies that will move sufficiently to allow a a buy to a sell or vice a versa to generate a net gain for the trader.

Trading failure will occur due to a number of reasons, not reading market indicators correctly, being too flighty, entering and leaving the market too quickly for the trading positions.

Clearly a lack of understanding of market principles, trading behaviours and poor strategies to work through the market will all contribute to failures in the market. Other key reasons are hype, personality type of the trader and not expecting to make a loss, after all “ those guys and girls told you that you were only going to make money, not lose it”

There are a few things you may want to get your head around as a first step of trading, I will assume you have never actively traded shares. You need to learn about technical analysis and fundamental analysis; you need to learn about trading strategies and what to do with each strategy, for example are you trading on cross rates, us dollar trades, do you trade short term and for longer periods; what protection can you use, trading safety, I could use some sexual analogy there.

The last thing before I wrap this up is the use of automated systems to help you trade. Now some trading systems that brokers provide are reasonably sophisticated, but it doesn’t mean for example, you cant gain an advantage from using a tool to assist you in analyzing options for trades you could place.

So to wrap it up there is quite a bit to learn before you earn. Take a bit of time to learn elements of the market before taking your money to the market and loosing the shirt off your back in your first few trades. Don’t let paralysis by analysis to beat you though.

Happy trading

Forex Admin

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