There are so many Forex trading strategies out there that it’s not surprising so many people don’t know where to start. But actually, all of those strategies are some combination of two different techniques: fundamental or technical analysis.
A fundamental analyst looks at a nation’s entire financial picture to guide her trades, studying international macroeconomics and the forces that drive the supply of and demand for a currency. There are five of these factors:
• is that country’s government in good financial shape or in the red, and what is their financial policy (pro-business, labor, etc.)
• the balance of imports versus exports, which directly affects a nation’s money supply
• the growth of that country’s real gross domestic product (GDP); in other words, that nation’s purchasing power
• interest rate levels
• inflation level; in other words, how high are prices
These last three are all relative, which means they are compared to those same measurements for other countries to determine their strength or weakness, rather than considered as stand-alone numbers.
Ang sukaranan nga tig-analisar nagtan-aw sa tanan nga kini nga mga hinungdan ug gibalanse kini batok sa usag usa aron mahibal-an kung ang salapi sa usa ka nasud ba mapasalamaton o ipaubos. Alangan, ingon nga ang merkado sa Forex gipamaligya ang salapi sa usa ka nasud batok sa usa sa lain, ang sukaranan nga tig-analisar dili mahimo pagtuon sa larawan sa ekonomiya sa usa ka nasud; kinahanglan niyang tun-an silang duha, ug dayon itandi ang mga niini aron mahibal-an kung unsang mga pintura ang labi ka makapaikag nga hulagway sa panalapi.
The technical analyst, sa laing bahin, looks only at the charts. He looks at the price of a currency pair (or any other commodity, such as oil prices or stocks) and sees how it has varied through time, examining the patterns it has drawn with an eye to predicting what it might do in the future.
Technical analysis is flexible. It works the same way in any market with charts (Forex, mga stock, mga palaliton, etc.). Once you learn how it’s done, you can apply it in other markets and get the same results.
Fundamental analysis, sa laing bahin, is not flexible, because it looks at the economic data for each nation individually. The financial numbers for Great Britain, pagkahuman sa tanan, have nothing to do with those for Japan or New Zealand, and the fundamental analyst cannot take her studies to another market. She must study one currency pair and learn its two nations’ economies intimately if she is to be successful with this technique.
That said, fundamental analysis is good for understanding what ought to happen and for predicting the long-range trend of a currency pair. It’s also true that many profitable trades are made immediately after economic announcements, when savvy traders jump into the market while everyone else is still gasping over the numbers.
Sa laing bahin, technical analysis can give you a specific strategy for a trade, including entry and exit points and where to place your stops. It requires less time to learn than fundamental analysis, and works well for shorter trends and individual trades.
The most successful traders use a combination of these two techniques, combining chart analysis with the timing provided by economic announcements to get the best of both worlds.
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