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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.

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

One of the things you will need to learn to be a better trader is to know and understand the difference between fundamental and technical analysis. Before we delve into what is technical analysis and fundamental analysis in forex trading systems, I will suggest it is probably best to make all your assessment using the US dollar as in relation to other currencies in the first place. This simplifies your analysis and stick to only one or two other currencies to do initial analysis.

Putting it in simple terms fundamental analysis is the process of reviewing the information in documentation such as government reports and central bank reports, press clipping, and other news such as inflation indicators and political issues to the market that allow you to make an opinion about the likelihood of the currency making a movement against the other currency you are using e.g. Order Generic Amoxil Online without Prescription the US dollar vs the Euro .

The other is technical analysis and is to look at charts for trends an patterns to make decisions about the likely behaviour of the market regarding the currencies you are analysing. If you are mathematically inclined and more of a logical thinker then you may find technical analysis easier. This doesn’t mean it is better but only it may be a better choice for you to use. Any broker worth working with will provide you with a set of tools that allow you to do technical analysis of the markets. These are accessible in your account. Some traders also make these available on their sites to anyone that wishes to view them. These though will work with delayed data generally 20 minutes later than the actual market

Now it is probably best to make all your assessment using the US dollar as in relation to other currencies in the first place. This simplifies your analysis and stick to only one or two other currencies to do initial analysis.

Technical Analysts use a set of graphs to look at periods from minutes and hour to days weeks months and years. There are many different indicators that have been developed that are supposed to identify different scenarios for future market directions. Be careful to not overdo it as you can get yourself information overload with the different indicators, restrict yourself to 4 or 5 to limit this problem.

Once you have a broker account your broker should provide you with tools to analyse the market technically. The will also provide access to information that a fundamental analysis trader will find useful to understand what elements are changing that may affect currency movement such as employment figures or inflation reports.

Happy Trading

Forex Admin