By Alfonsas Mykolas
In forex trading there are two main groups of traders that use completely different approach in their analysis. They are called forex technical and fundamental traders.
They might both trade the same currency pairs and at the same time and even in the same direction - but their style is different.
Forex fundamental trading is based on economical as well as political news releases on a national and worldwide scale. The reason why any forex pair is moving is mainly because national and international news are published every day. It's the same with a stock market: the news of a particular company drives its stocks either upside or downside. The more shocking news - the greater the impact on stocks. We all remember the recent economic crisis of 2008, when stocks dropped to a ten year lows in a matter of few months. Those stocks were driven by global stock market news, despite the possibly good results of some companies. The currency pairs behave the same - currencies react to national and international news. As we know every currency is kind of an indicator of a nation's wealth. For instance, if the USA is doing badly in exports and their jobless rate is increasing - the dollar might probably go down. The better the nation's economical data the higher its currency goes in relation to other currencies, and vice versa. News traders try to get the best forex news sources that quickly provide real time updates.
However, there are some shortfalls when trading news. There are many powerful and influential banks and corporations that interpret news releases as they like and their multibillion dollar trades strongly influence the whole forex market. More over - news releases can be misleading; hence you cannot rely completely on what some politician has said or how bad the exports were.
Forex technical trading is based on past currency moves and their patterns. It is believed that the behavior of any financial asset in the past, be it currencies or stocks, will repeat itself in the future. There are some particular figures and chart patterns in stock and forex pairs' movements that are recurrent in the course of time. Analysis and identification of trading chart patterns and geometrical figures in a stock and forex market is the basis of technical trading. The most popular chart patterns are head and shoulders, double top or double bottom, trend and channel lines, resistance and support levels. There are a vast number of traders whose belief and decisions based on this kind of forex analysis usually moves a forex pair in a certain direction. Another popular tool used by technical traders is trend, accumulation, volume etc. indicators, which also help to predict future moves and enter the market.
Sadly, technical trading has also the drawback of producing false signals, besides it is often the consequence of the news release, and even ideally looking chart patterns get disrupted. As I am more of a technical trader, I do not trade during the important news publications and do not completely rely on indicators. The main thing in forex is the percentage of your false moves against the successful trades and the way you manage your funds.
They might both trade the same currency pairs and at the same time and even in the same direction - but their style is different.
Forex fundamental trading is based on economical as well as political news releases on a national and worldwide scale. The reason why any forex pair is moving is mainly because national and international news are published every day. It's the same with a stock market: the news of a particular company drives its stocks either upside or downside. The more shocking news - the greater the impact on stocks. We all remember the recent economic crisis of 2008, when stocks dropped to a ten year lows in a matter of few months. Those stocks were driven by global stock market news, despite the possibly good results of some companies. The currency pairs behave the same - currencies react to national and international news. As we know every currency is kind of an indicator of a nation's wealth. For instance, if the USA is doing badly in exports and their jobless rate is increasing - the dollar might probably go down. The better the nation's economical data the higher its currency goes in relation to other currencies, and vice versa. News traders try to get the best forex news sources that quickly provide real time updates.
However, there are some shortfalls when trading news. There are many powerful and influential banks and corporations that interpret news releases as they like and their multibillion dollar trades strongly influence the whole forex market. More over - news releases can be misleading; hence you cannot rely completely on what some politician has said or how bad the exports were.
Forex technical trading is based on past currency moves and their patterns. It is believed that the behavior of any financial asset in the past, be it currencies or stocks, will repeat itself in the future. There are some particular figures and chart patterns in stock and forex pairs' movements that are recurrent in the course of time. Analysis and identification of trading chart patterns and geometrical figures in a stock and forex market is the basis of technical trading. The most popular chart patterns are head and shoulders, double top or double bottom, trend and channel lines, resistance and support levels. There are a vast number of traders whose belief and decisions based on this kind of forex analysis usually moves a forex pair in a certain direction. Another popular tool used by technical traders is trend, accumulation, volume etc. indicators, which also help to predict future moves and enter the market.
Sadly, technical trading has also the drawback of producing false signals, besides it is often the consequence of the news release, and even ideally looking chart patterns get disrupted. As I am more of a technical trader, I do not trade during the important news publications and do not completely rely on indicators. The main thing in forex is the percentage of your false moves against the successful trades and the way you manage your funds.
If you do not have time to trade in forex, I recommend reading some info on managed forex trading. Forex technical traders might find some useful information on basic forex investment indicators.
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