Trading Techniques -

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.