Defining the Superior Type of Foreign Exchange Analysis
Two kinds of foreign exchange market analysis stand tall:
1. Fundamental analysis concerns itself with scrutinizing socio-political and economic forces and defining their influence on the market.
2. When the analysis is centralized specifically on the use of charts and graphs to study price movements and to point out trends, this is called TECHNICAL ANALYSIS.
So which is the superior analysis? If you check out forums and websites you will come across many traders heavily supporting one or the other. Those who like to depends on charts will tell you that the only way to make money with currency trading is to distinguish trends and jump onto them as quick as possible.
On the other hand, the fundamental analysts will announce that currency prices are actuated by socio-economic factors, a fact that cannot be renounced. Thus according to them, chart patterns are mere concurrences that have no real relevance on reality.
But rationally this does not necessarily occur. Even though economic changes have a massive significance on the currency markets, it may still be possible to recognize patterns in the way that the markets react after a new information or in times when there are no major notificaitons.
If on the other hand you rely completely on your charts, you are likely to be caught out when a preeminent financial event such as an interest rate change is unanticipatedly announced. You were not giving consideration to the financial news and left a trade open at the wrong moment. That might result in debacle.
So the crux is that there are economic occurences behind the larger scale rises and falls in the market, but there are also casual patterns that can be recognized in the short term. Identifying these patterns and trends, while keeping one eye on the economic and political news, is the best technique to predict future price movements. And predicting future price movements, obviously, is the way to make money with currency trading.
Currency market movements are quite like elastic that can stretch in one way or another and then fall back, although not always to its beginning position. The fundamentals are the impetus that cause it to stretch. Technical analysis foresees how far it will swing in each direction before reversing.
The resolution then is that a smart trader employs both methods. So to perpetually make profits in the forex market you must know when to use which tool and how much importance you will give to their corresponding, predicted outcomes. - 23159
1. Fundamental analysis concerns itself with scrutinizing socio-political and economic forces and defining their influence on the market.
2. When the analysis is centralized specifically on the use of charts and graphs to study price movements and to point out trends, this is called TECHNICAL ANALYSIS.
So which is the superior analysis? If you check out forums and websites you will come across many traders heavily supporting one or the other. Those who like to depends on charts will tell you that the only way to make money with currency trading is to distinguish trends and jump onto them as quick as possible.
On the other hand, the fundamental analysts will announce that currency prices are actuated by socio-economic factors, a fact that cannot be renounced. Thus according to them, chart patterns are mere concurrences that have no real relevance on reality.
But rationally this does not necessarily occur. Even though economic changes have a massive significance on the currency markets, it may still be possible to recognize patterns in the way that the markets react after a new information or in times when there are no major notificaitons.
If on the other hand you rely completely on your charts, you are likely to be caught out when a preeminent financial event such as an interest rate change is unanticipatedly announced. You were not giving consideration to the financial news and left a trade open at the wrong moment. That might result in debacle.
So the crux is that there are economic occurences behind the larger scale rises and falls in the market, but there are also casual patterns that can be recognized in the short term. Identifying these patterns and trends, while keeping one eye on the economic and political news, is the best technique to predict future price movements. And predicting future price movements, obviously, is the way to make money with currency trading.
Currency market movements are quite like elastic that can stretch in one way or another and then fall back, although not always to its beginning position. The fundamentals are the impetus that cause it to stretch. Technical analysis foresees how far it will swing in each direction before reversing.
The resolution then is that a smart trader employs both methods. So to perpetually make profits in the forex market you must know when to use which tool and how much importance you will give to their corresponding, predicted outcomes. - 23159
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posted by X - Men @ 3:39 AM
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