How to Do Forex Analysis Using Fundamental And Technical Analysis
Forex traders make use of Forex analysis to decide whether to buy or sell a currency pair at any given point of time. Forex analysis can be technical or fundamental in nature. Technical analysis is done with the help of charting tools. Economic indicators and news-based events are used in Fundamental analysis.
What is fundamental analysis?
Fundamental analysis involves monitoring of economic factors like interest rates, unemployment rates, gross domestic product (GDP) etc to identify changes in forex market. The analysis is done for the countries whose currency pair is being traded. For example, a trader analyzing the EUR (Euro) /USD (U S Dollar) currency pair fundamentally, will look at the interest rates in the Euro zone, compared to U.S. Any important news pertaining to the well being of the countries economies will also be tracked closely by the analysts. Such news is capable of influencing currency price movements and is an important aspect of fundamental analysis.
What is technical analysis?
Technical analysis involves tracking of past currency price movements to identify the direction in which the current price may be heading. This analysis can be manual or automated. In the manual system the trader analyses the technical indicators and decides to buy or sell. Under the automated system the trader educates the software on what type of signals to identify and the method of interpreting them. There is no human element involved in the automated analysis.
There is no ideal or the best method of forex analysis that is guaranteed to provide 100 % results all the time. The method of analysis to be used will depend upon time frame and information which traders can easily access to make their trading decisions. For example for a short-term trader, economic factors may not be of importance. Technical analysis and charting will assist short-term traders to make their decisions. However long term traders will need to ascertain and keep themselves abreast of the latest economic news and data pertaining to countries whose currency pair they are trading in.
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Author: Ian Drew
Article Source: EzineArticles.com
Digital economy, mobile technology
