By: Donald Saunders
Traditionally Forex traders have based their trading decisions on fundamental analysis which looks at both past and present political and economic events to predict future movements in currencies.
Fundamental analysis is not easy and requires the trader to have considerable knowledge of political and economic events and experience in analyzing both. It also requires the trader to work with a hue quantity of data. In addition, there is considerable disagreement amongst traders over just what political and economic data is important when it comes to predicting currency movements and, where agreement does exist, there is still often argument over how much weight each factor in the equation should be given.
Today however traders have the option to abandon fundamental analysis in favor of technical analysis.
Many people believe that technical analysis is nothing more than a modern day extension of fundamental analysis and it is based upon three principles:
First, many things produce movements in currency prices, including political and economic events, but the effect of these forces has already been absorbed into a currency's price at any moment in time. In other words, there is no need to look at the reasons for the movement in a currency price but to simply focus on the price movement itself.
Second, the price of a currency will follow a clearly defined trend which can be seen by examining the patterns which emerge in the market over time.
[Read full article]
Fundamental analysis is not easy and requires the trader to have considerable knowledge of political and economic events and experience in analyzing both. It also requires the trader to work with a hue quantity of data. In addition, there is considerable disagreement amongst traders over just what political and economic data is important when it comes to predicting currency movements and, where agreement does exist, there is still often argument over how much weight each factor in the equation should be given.
Today however traders have the option to abandon fundamental analysis in favor of technical analysis.
Many people believe that technical analysis is nothing more than a modern day extension of fundamental analysis and it is based upon three principles:
First, many things produce movements in currency prices, including political and economic events, but the effect of these forces has already been absorbed into a currency's price at any moment in time. In other words, there is no need to look at the reasons for the movement in a currency price but to simply focus on the price movement itself.
Second, the price of a currency will follow a clearly defined trend which can be seen by examining the patterns which emerge in the market over time.
[Read full article]
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