There are two basic methods that use forex traders to analyze the market. They are technical and fundamental analysis. Purely technical analysts say that it is impossible in the news for trading because the market is moving so fast and whatever messages are the charts and you will say. On the other hand fundamentalists will say that only the news moves the market. Technical indicators are still the trailers. So, what methods should we use? To find out, let's look at look at the pros and cons of both methods.
Technical Analysis
includes Technical Analysis past exchange rate movements and use indicators tracking, may be heading to identify the direction in which the current price. This analysis can be carried out manually or automatically. Under the automated system Dealer Software (consultants) or robots to help them find businesses and identify entry and exit points. Technical traders believe that all the necessary information needed to place a trade is in the charts.
Fundamental Analysis
Fundamental analysis focuses on the key underlying economic, financial and political factors that determine the price direction of a currency. Fundamental traders believed that currency movements, whether it is more or less, are the strength of the economy related, financial and political situations. Therefore, basic reports and messages are important to them. News and reports such as interest, employment, trade balance and GDP are of great importance. Other information such as retail, durable goods, home sales and ISM will also affect the price movement.
Technical Analysis
benefits
-It helps provide specific entry and exit point for traders on the market.
-Charting, each an easy way to identify trends of care immediately. This is possible because the same data also by millions of traders, as a result, when a large number of forex traders do the same to be observed, this is potentially a self-fulfilling prophecy create further the trend to strengthen.
-It focuses on the charts and indicators. There is no doubt the simplest and most accurate method of many dealers used previously.
-plans and tools can sometimes help also indicate when a trend over the start or end. Therefore help traders, their profits and losses stop to plan accurately.
Disadvantages
-When many traders around the same areas to place their stops, this could prompt a reverse price movement, as it allows potentially bigger players in the market, it can intentionally trigger these attacks.
tools -The used are lagging indicators basically. It can be dangerous, all based on the assumption that the current price and trend will continue prices predict. They often, but not necessarily.
-Relying fully represent in charts that you can not receive any other signals that may be able to change the trend.
fundamental analysis
benefits
-Fundamental analysis increases our knowledge and understanding of the global market. Therefore help us to get a clearer picture of the overall health of the global economy.
-We can use fundamental analysis in order to explain some of the unexpected movement of prices. therefore know what prices to move higher or lower.
Release -Major messages can sometimes ignite large price movement if there is a big difference between the expectations and actual results. If you predict this price movement and capture, it can be very profitable.
-Fundament analysis is better used for motion predicted longer-term exchange rate.
Disadvantages
-There is so much information that can be easily confused.
-It is very difficult to use all of this information, point to act a particular entry or exit point to pin.
-Sometime short press release may send a wrong signal provide and mislead traders to open a trade. This signal, often building a knee-jerk reaction in the market.
-Sometimes the information or news releases were already priced into the market. Therefore, the information does not have any material impact on the price movement.
-It requires a person with at least some basic knowledge of the economic background.
-News Releases can sometime dramatically and quickly generate price movement of a currency pair both try in upward and downward direction as the Forex market to digest the news. Inexperience dealers can be found trapped in a series of losses.
Conclusion
In my opinion it is not an ideal or best way to forex analysis that a 100% guaranteed results all the time. Technical analysis and charting will help short-term traders to make decisions, while long-term traders need to keep up on the latest economic news and data that they are traded on the market currencies. Note that these analytical methods are just tools. When used properly, it can usually help you to act more effectively. This is why most Forex traders are usually both analytical approaches use commercial decision.
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