Foreign Exchange Market Analysis: Which Type Is More Practical, And The Right Way To Use It In Your System?

There are two kinds of currency market analysis: fundamental analysis, which takes into account economic, social and political impacts and which way they influence the currency markets, and technical analysis which applies graphs to identify trends and formations in the movement of prices.

So which the right one? If you go to forums and websites you can find a lot of traders strongly supporting one or the other. Those who like to lean on on graphs will explain you that the only method to earn profits with currency trading is to spot trends and jump onto them as early as possible.

At the same time the advocates of fundamental analysis believe that it is the economic factors that drive the changes in forex trends and this is definitely correct, at least most of the time. From that position they will argue that any formation you might observe on a graph are nothing more than coincidental.

But logically this does not necessarily follow. Even though economic changes have a enormous influence on the currency markets, it may still be possible to detect formations in the way that the markets move after an news release or in times when there are no important announcements.

If on the other hand you count solely on your graphs, you can probably be caught out when a major market event such as an interest rate modification is unexpectedly released. If you were not watching the financial news and left a trade open at the wrong side of the market, that could cause a disaster.

So the final conclusion is that there are economic events behind the larger scale movements in the market, but there are also basic formations that can be recognized in the short term. Finding these patterns and trends, while keeping one eye on the economic and political news, is the right way to forecast future price movements. And foreseeing future trend changes correctly, certainly, is the way to earn profits with forex trading.

Foreign exchange market movements are a little like elastic that can expand in one way or another and then fall back, although not always to its starting position. The fundamentals are the forces that cause it to expand. Technical analysis predicts how far it will go in each direction before turning around.

So when you want to make money from currency trading it is better not to allow your attention to become fixed on either one. You must learn to balance the use of both kinds of forex market analysis to make consistent profits.
The best tool to find out whether an analysis is correct or not is using forex trading signals. If you can find a good forex signal provider, whose accurate forex signals are in agreement with the analysis, then you can bet on what you read.

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