Fundamental or Technical Analysis

The Forex market allows anyone to participate on the currency trading business. 

Some of these participants are the Governments, Reserve Banks, Large Mutual Funds, Hedge Funds and even Individual traders at home. 

I myself is an individual trader where all I need to join the trading exchanges is a computer with a stable internet connection.

If you have been on some other related Forex websites or Blogs then you must have been already warned about the danger and risks of losing your investment. 

Through the years of my trading career, I have lost numerous times and it is due to greed and lack of education. 

This has proven that trading Forex is totally risky especially when you do not know exactly what you are doing.

The most important factor that every trader should try to develop is their analytical skill to analyze the behavior of the market. 

These are the fundamental and technical method of trading style. However, more guaranteed result can be achieved by combing the two methods.

The main focus of this Fundamental Analyst is to study the condition of the Economy, Social, Political and Geographic forces influencing the type of currencies that are being analyzed. 

These factors have the potential to drive the supply and demand on a certain level of prices.

The primary tools of the Fundamental Traders are the Micro-Economic indicator such as the Interest rates, Inflation, Unemployment, Economic Growth Rates and etc… 

Analyzing these events on how they are going to affect the behavior of the traded currencies is the hardest part where only a financial expert is capable of doing. 

However, even professionals do commit mistakes on their analysis so it’s always best to be prepared on taking the risk.

Technical Analyst tends to study the previous price movement of the market. They analyze the past historic data of the currencies and based their decision in trying to predict the future price trend direction. 

All technical traders believes that the “Market repeats itself” which mean that the next trend can be determined by studying Price Action.

The basic tools of a Technical Trader are charts where they use it to define profitable trend and patterns. 

The concept of their analysis is that the market will always move in two different directions which is either Bearish or Bullish condition. 

Their aim is to be able to define the best possible entry level before the trend starts to be developed.

Past Historical Data

Whatever type of trading style that you prefer to adopt, the most important part is that you are gaining profit and enjoying the method without suffering too much stress.

Technical Trading Method

The most popular type of trading style is the Technical Method. Traders of this type often use various types of indicator tools to guide them on their analysis regarding about the future direction of the forex market.

The most basic tool of a Technical Trader are the three different types of charts which are the Line, Bar, and Candle Stick. The Line Chart is the simplest chart among the three where the highest and the lowest prices are directly connected to form the lines.

The Bar Chart and the Candle Stick provides almost the same data except on their appearance. Please refer on the image posted below regarding about how they look like.

Most Technical Traders prefer to use the Candle Stick type of chart because it provides all of the necessary data such as the High, Low and Close price. It also has the best figure that clearly illustrates the behavior of the market’s volatility.

Bar Chart can also indicate data as of with the Candle Stick and there are still some traders who prefer to use this chart on their trading analysis.

However, using these three different types of charts on your analysis will provide the best result. Further details about forex charts are the Time Frames. 

You can view the behavior or volatility of the market on a closer look by adjusting the Time Frame of your trading platform. 

The most commonly used are the 1, 5, 15, minutes, 1, 4, hours, weeks and months.

Starting from the 1 minute to 1 hour period, these are used by the traders known as “Scalpers”. 

They open their trades for just a short period of time and when they managed to gain a small amount of profit they will immediately close that position. 

This for of trading style is very risky that only professionals can successfully use.

The 4 hours to 1 day Time Frame are used by the Day Traders. They only open a position once for every given period of a single day. This form of trading style is the most suggested method to adapt especially to all beginners because less risk is involve.

The longest period starts from 1 week to months. Other FX Brokers even provide years. This chart period are often used by Long-Term Traders. 

Their trading style works by letting their position run for a long period of time until they manage to achieve their target profit.

Line Chart

Moreover, Technical Trader’s analysis are solely based on the past historic data of the market prices. They believe that the previous price action of the market will repeat itself. 

This can be proven by studying chart patterns where it’s the best method for Newbies to start learning their first strategy.