Forex Platforms

Forex Trading: Technical Analysis

Making decisions about forex trading strategies can be made a little easier when you have a method of analysis that can help you determine likely movements on the FX market. Technical analysis and fundamental analysis are the two main ways to analyze what you see happening on the foreign currency exchange. Technical analysis is mostly concerned with forex charts, however, and price action.

Technical analysis is mainly about looking at forex trading charts and making decisions based on the trends seen in the price. While some may look to a few outside factors that affect the foreign currency exchange, for the most part technical analysis is almost exclusively concerned with what is going on with the pure numbers that represent the exchange rate.

For the most part, a good FX trading platform will allow you access to forex charts so that you can see exactly what is happening. By looking at price trends over a set period of time (anywhere from hours to months), it is possible to get a feel for what a foreign currency may do next on the forex market. There are even different techniques to help you interpret what you are seeing and make your currency trading decisions.

There are primers that go into detail about different ways to read forex trading charts, and how you can use different methods to analyze the data. The two main methods, though, are Fibonacci and Elliott Wave. Both of these technical analysis tools require a bit of study to learn the knack of it. Luckily, it is likely that your forex trading platform has tools to help you make use of these types of technical analysis. (The forex platform from Deutsche Bank, dbFX, offers a number of technical analysis tools, including Fibonacci.)

While technical analysis can be very helpful, and while many forex traders (especially those interested in the short term) use technical analysis exclusively when developing forex strategies, it is important to remember that there are limitations. The FX market is volatile, and it is possible that sudden movements that defy usual analysis on forex charts can result in losses.

Tags: analysis, Elliott Wave, Fibonacci, Forex, Forex Trading, Technical Analysis

Forex Trading: Fundamental Analysis

When deciding on forex strategies, it is often helpful to have some method of analysis that you can use to help you determine what is most likely to happen in currency trading. You can either use fundamental analysis or technical analysis. Fundamental analysis is more of the “big picture” view of the forex market.

While you can use forex trading charts to help you get a more complete picture of foreign currency rates, fundamental analysis focuses more on the underlying factors affecting price movement. The idea is to look at the fundamentals that support a certain foreign currency, most often considering factors that have to do with the economy attached to that currency.

Fundamental analysis makes use of such items as economic policy, political currents, events and the state of the economy (with the help of economic data). In forex trading, these macro-events often influence the way traders view a currency. In foreign exchange trading, perception is important. If political unrest makes forex traders nervous about a certain country’s assets, then that currency is likely to be bid lower when it comes time to make an FX trade.

Economic data is also very important to fundamental analysis. A currency is most often supported well when its economy is growing. In the euro exchange, economic news coming out of Germany plays a big role. When expansion is seen, and when business confidence is high in Germany, the whole euro zone benefits. When the euro zone is perceived as having a stronger economic outlook than the U.S., then the euro currency does better in forex trading.

Another consideration in fundamental analysis is often commodities. With commodity currencies, the way that the commodities market moves is important. These currencies rely on exports – such as oil, timber and precious metals – to support their currency. When global trade is up, commodity currencies normally do well, and forex trading charts are not needed to see that things are going well for certain currencies.

Paying attention to price action is still somewhat important to fundamental analysis, but it is not the only thing. Fundamental analysis requires that some attention is paid to underlying factors when online forex trading decisions are made.

Tags: analysis, Fundamental Analysis

Forex Trading Basics – Fundamental vs. Technical Analysis

Currency trading is one of the riskiest – and potentially one of the most rewarding- ways to invest.  Those who have a knack for this unique type of market have made fortunes for themselves and their companies, but it is just as easy to lose money trading currencies.  Understanding not only the potential profits but the inherent risks as well is essential to success in currency trading – or in any investment market.

 

Another critical part of successful currency trading is education, and it is vital for new investors to learn as much as possible about how world currencies are traded on the open market.  Knowledge is power when it comes to investing, and it is important for any would be currency trader to seek out as much unbiased information as possible before jumping into the fray.

 

One of the most critical distinctions in the world of Forex currency trading is the difference between fundamental and technical analysis.  These two competing forms of analysis are used by Forex traders to predict the movement of currency prices around the world, and it is important for every investor to understand how each method works.

 

Fundamental analysis is focused on a number of theoretical models.  These sophisticated models are used to predict and determine exchange rates through a series of calculations.  These calculations use a variety of inputs, including current and predicted future economic conditions around the world, and how likely it is those conditions will cause currency fluctuation.

 

Currency traders who use fundamental analysis will also look at factors like supply and demand levels for a particular world currency, as well as recently reported news and other factors that could affect the value of the currency in the short run.  Successful fundamental analysis also addresses social and political factors as well as economic ones, since both politics and social unrest can greatly affect the value of a country’s currency. 

 

Forex traders will also need to be aware of things like unemployment rates, the rate of inflation, predictions for economic growth and other economic factors.  These are all critically important to the effective predication of currency moves.  Unexpected news and announcements – either good or bad – can also greatly increase the volatility of the currency market.  Successful currency traders will need to be able to respond quickly to fast moving world events.

 

Technical analysis is quite a different beast compared to fundamental analysis, and it is important for players in the currency market to understand these two different approaches.  While fundamental analysis uses current events, predicated trends and the latest facts and figures to predict future currency movements, technical analysis relies a great deal on what the market has done in the past.  This analytical tool often uses charts and graphs to display the movement of currency markets in the past and uses those past performance numbers to make predictions about future currency trades.

 

Both types of analysis can be quite useful to Forex traders, and many investors have had great success using both fundamental and technical analysis.  Which method works the best is still the subject of much debate and much heated discussion, and every new currency trader should look at both fundamental and technical analysis before deciding on the best approach.

Tags: analysis, Forex Trading