Forex: Fundamental and Technical Analysis.
Fundamental analysis is based upon underlying economic conditions, while technical analysis uses historical prices to predict future movements. There is an ongoing debate as to which methodology is more successful. Short-term traders prefer to use technical analysis, focusing their strategies primarily on price action; while fundamental traders focus their efforts on determining a currency’s proper current as well as future valuation.
Fundamental analysis focuses on the economic, social and political forces that drive supply and demand. Fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment. They combine all of this information to assess current and future performance. This requires a lot of work and thorough analysis, as there is no single set of beliefs that guides fundamental analysis. In addition, fundamental analysts need to continually keep abreast of news and announcements, as they can indicate potential changes to the economic, social and political environment. For example, this week is the highly anticipated monthly Non-Farm Payroll Announcement in the USA, which often creates a wave of Forex volatility.
Prior to the mid 1980s, fundamental traders primarily dominated the Forex market. However, with the rising popularity of technical analysis and the advent of new technologies, the influence of technical trading on the FX market has increased significantly.
Technical analysis focuses on the study of price movements. Technical analysts use historical currency data to forecast the direction of future prices. The premise of technical
analysis is that all current market information is already reflected in the price of that currency; therefore, studying price action is all that is required to make informed trading decisions. In addition, technical analysis works under the assumption that history tends to repeat itself. Technical analysis is a very popular tool for short to medium term traders. It works especially well in the Forex market because short-term currency price fluctuations are primarily driven by human emotions or market perceptions.
The most basic concept of technical analysis is that markets have a tendency to trend. Being able to identify trends in their earliest stage of development is the key to technical analysis. Charts are the primary tool in technical analysis and are used to identify trends and patterns in order to find profit opportunities.Technical analysis integrates price action and momentum to construct a pictorial representation of past currency price action to predict future performance. Technical analysis indicators popular with technical Forex traders include Fibonacci retracement levels, moving averages, oscillators, candlestick charts and Bollinger bands.
Technical and Fundamental Trading
At ForexSignal.com, we believe Forex trading should by analyzed by a combination of Technical and Fundamental factors. Our human Trading Team works hard to stay abreast of the news and financial events around the world, while at the same time employing technical indicators and analysis to fine tune specific entry and exit prices. We do the work for you, so that all you need to do is provide us with your phone number and we will send you a text message when it is time to trade which includes Entry Point, Stop Loss and Take Profit. Or, if you want to participate without having to do any work at all, then all of our trades are available to be sent directly to your MT4 platform with our Trade Copier.