Forex: Understanding Fundamental and Technical Analysis
Technical analysis
Focuses on price patterns and uses charting to differentiate them. Technical analysis focuses on price action and market behavior. With the use of various indicators, you will be able to locate and combine pattern recognition with your favorite indicator for confirmation to take a trade.
The indicators are available on most trading software, and all calculations are done automatically within the software.
The problem with trading indicators only is that, first they are lagging price, and then you are only looking at the right side of your chart, waiting to see what will happen. What about the left side, or the side of your chart that is telling you what has already happened? This is a very important aspect of trading. A good chart is priceless if it helps to identify a great opportunity.
Momentum analysis is a measure of the change in Forex trading trends over a certain period of time. Certain momentum indicators will show if a currency is overbought or oversold, and these are common and very helpful tools for technical analysis.
Fundamental analysis
Regards price behavior as a product of economic and political events. Fundamental analysis involves the use of economic data, critical political decisions or the different social issues that influence prices. Interest and employment are major economic data that could move the market considerably. Fundamental trading is a very effective way to forecast economic conditions, but not necessarily exact market prices.
Don't fill your mind with too much information, the best way to trade is the simple way. However, it is very important to understand fundamental and technical analysis in order to use them for your Forex trading.
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Showing posts with label Forecasts. Show all posts
Showing posts with label Forecasts. Show all posts
Saturday, August 15, 2009
Macro Assesment
Forex: Fundamental Analysis In Forex trading
How can one predict market movements in Forex trading?
Fundamental analysis forecasts future price movements based on economic, political, environmental and other relevant factors, like seasonal cycles, supply and demand, government policy. Fundamental analysis is a macro assessment of where a currency should be traded based on the movement of the currency's price itself.
The economic conditions of the country, monetary policy and other fundamental elements play an important role on this assessment. Many profitable forex trades are made moments prior, or shortly after, major economic announcements.
Fundamental analysis considers the intrinsic value of an investment when making a decision as to its future activity. There are some who feel that this is an excellent method of making decisions in the Stock market as a lot of data can be gathered and studied concerning the value of a Company.
The economy of a country goes through a basic business cycle, and there are a lot of indicators available to the investor to measure where a particular economy stands at any given time. Such indicators are followed by traders worldwide. The analysis would involve matching the stage of the cycle with its impact on the value of the currency.
The normal economic cycle consists of periods of inflation and deflation with peaks and troughs in between. Certain indicators such as the Gross National Product (GNP), Employment Report, Consumer Price Index and current prime interest rates can give a good idea of the stage of the economy at any given time.
Each of these indicators would tend to impact currency valuation in different ways, and sometimes would even vary from country to country. In the United States, rising interest rates are normally associated with currency deflation, for example, and it is factors such as this that are the heart of fundamental analysis.
This analysis can become quite detailed, but the focus remains on the country and its economy. Every factor that impacts the country and its economy can play a role in the value of the currency, and understanding these factors are the tools the fundamental analyzers use to guide their investment strategy.
How can one predict market movements in Forex trading?
Fundamental analysis forecasts future price movements based on economic, political, environmental and other relevant factors, like seasonal cycles, supply and demand, government policy. Fundamental analysis is a macro assessment of where a currency should be traded based on the movement of the currency's price itself.
The economic conditions of the country, monetary policy and other fundamental elements play an important role on this assessment. Many profitable forex trades are made moments prior, or shortly after, major economic announcements.
Fundamental analysis considers the intrinsic value of an investment when making a decision as to its future activity. There are some who feel that this is an excellent method of making decisions in the Stock market as a lot of data can be gathered and studied concerning the value of a Company.
The economy of a country goes through a basic business cycle, and there are a lot of indicators available to the investor to measure where a particular economy stands at any given time. Such indicators are followed by traders worldwide. The analysis would involve matching the stage of the cycle with its impact on the value of the currency.
The normal economic cycle consists of periods of inflation and deflation with peaks and troughs in between. Certain indicators such as the Gross National Product (GNP), Employment Report, Consumer Price Index and current prime interest rates can give a good idea of the stage of the economy at any given time.
Each of these indicators would tend to impact currency valuation in different ways, and sometimes would even vary from country to country. In the United States, rising interest rates are normally associated with currency deflation, for example, and it is factors such as this that are the heart of fundamental analysis.
This analysis can become quite detailed, but the focus remains on the country and its economy. Every factor that impacts the country and its economy can play a role in the value of the currency, and understanding these factors are the tools the fundamental analyzers use to guide their investment strategy.
Thursday, August 6, 2009
Forecast Currency
Forex: Factors affecting the value of a currency
Are FX price movements random chance, and the market a gamble?
There are technical and fundamental factors affecting the value of a currency. Most currencies define their price relative to the US dollar. Micro price fluctuations are unavoidable and unpredictable. However there is nothing like a special FX-sensitive event to drive the market all one way -- like elections, interest-rate changes, publication of economic indicators, Fed Chairman Greenspan's speech.
Anyone however humble who correctly forecasts the market can make sizeable profits. One day in October 1992, financier George Soros correctly judged the British pound was indefensibly overpriced. He fearlessly sold sterling against the dollar and made 2 billion dollars of profit within a few hours.
The FOREX market is so immense no individual can manipulate prices, not even the central banks. But private individuals can correctly identify then anticipate price trends thus making large profits employing small leveraged capital, depositing only 1% margin upfront. Actual price movement of a currency is normally very small, so we give you 100 times leverage to make significant profit levels possible.
Are FX price movements random chance, and the market a gamble?
There are technical and fundamental factors affecting the value of a currency. Most currencies define their price relative to the US dollar. Micro price fluctuations are unavoidable and unpredictable. However there is nothing like a special FX-sensitive event to drive the market all one way -- like elections, interest-rate changes, publication of economic indicators, Fed Chairman Greenspan's speech.
Anyone however humble who correctly forecasts the market can make sizeable profits. One day in October 1992, financier George Soros correctly judged the British pound was indefensibly overpriced. He fearlessly sold sterling against the dollar and made 2 billion dollars of profit within a few hours.
The FOREX market is so immense no individual can manipulate prices, not even the central banks. But private individuals can correctly identify then anticipate price trends thus making large profits employing small leveraged capital, depositing only 1% margin upfront. Actual price movement of a currency is normally very small, so we give you 100 times leverage to make significant profit levels possible.
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