Technical Or Fundamental Kind Of Analysis Of The Forex Market, Which One To Choose?
July 15, 2010 by Forex Guide
Filed under Forex Book
The essence of the work on the Forex market.
The work on the Forex market will allow you to manage your assets effectively and to invest them to a highly remunerative and highly liquid business. The income turns out because of the constant change of exchange rates and the possibility to operate with the sums that of 100 times exceed your initial deposit.
Earnings principle: you buy or sell one currency (and at the beginning it is not necessary to have the currency in order to buy or sell the currency, it will be given by the broker to you), and then after time the return operation is made, the difference of the rate’s cost is your income.
But how to determine what currency should be bought and when to sell it? You must do analysis of the Forex market to determine the movements of exchange rates. There are two kinds of analysis: the fundamental and technical analysis. Each of the kind has its advantages and disadvantages. You should explore both in order to determine what kind of analysis you should prefer. It depends only on your own preferences and skills.
Experienced traders who successfully work on the Forex market, recommend not to neglect one or another kind of the analysis. The fundamental analysis allows to understand the tendencies of the currency market in long-term aspect and at present time. The technical analysis, in turn, with the help of every possible tools gives the chance to imagine visually the existing trends and to estimate the possible levels of the beginning of the big movements (or their terminations), the quantity of movements, their probable corrections, and the most important thing is that the technical analysis allows to define levels for opening and closing of positions.
However sometimes there are events on the market, that can be explained (or predicted) from the point of view of only one of analysis kinds. For example, if during the given period of time there is no intense influence of fundamental factors on the currency market then the dynamics of the market can be judged only proceeding from the technical analysis. During such moments of time the movement can be kept either on a trend, or correction to it can begin, or the rate will make fluctuations in the horizontal channel. Depending on the lines of trends and indicators of the technical analysis show, traders make decisions.
There can be other situation when it is possible to explain the big movements only as a result of the analysis of economic or political events (fundamental analysis). Vivid examples of such situations are every possible crises of course. During such periods traders often forget about every possible levels of support or resistance and about technical indicators (though at more careful analysis on such markets it is possible to find the technical laws). In this case it is very important to define the tools that are most subject to influence of crisis and a direction of their probable movement. At trade in such conditions in the foreground there will be a direction chosen and on the second will be chosen various attributes of the technical analysis.
It is vital to gather as much information about Forex as possible. Because this info will help you not to lose much money on Forex trading or Forex investment.
Surely not a single piece of knowledge can be a 100% guarantee against losses, in particular on Forex market, but sometimes just one Forex books can save you much money.
