Foreign Exchange Analysis: Which Method Is effective?
Two methods of FX market analysis prevail:
1. The method of analysis that concerns itself with assessing the nature and the ramifications of socio-economic and political undercurrents on the FX market is called FUNDAMENTAL ANALYSIS.
2. When the analysis is centralized especially on the use of charts and graphs to study price movements and to identify trends, this is called TECHNICAL ANALYSIS.
So which is the more suitable analysis? If you check out forums and websites you will chance upon many traders heavily supporting one or the other. Those who like to lean on charts will tell you that the only way to make money with currency trading is to find out trends and jump onto them as fast as possible.
However, those who approve fundamental analysis will maintain that the solitary drivers of the market prices are socio-political and economic aspects, a fact that has been proven time and again in almost all of the movements. They describe that any interdependence between the charts and real time movements are only by chance.
That declaration should be taken with a grain of salt. While the direct and broader effects of economic changes is unmistakable, in post major announcements stage and relatively event and change free times, technical analysis may be of aid in predicting movements.
But if you place all your conviction in technical analysis, unforeseen announcements in influential financial news will presumptively catch you off guard. Since you would be relying on charts and not news, you can end up picking the least favorable time to trade. Such a contingency could be cataclysmic.
The result therefore is that short term trading can benefit from finding out trends via technical analysis while the large price movements are mostly created by socio-economic or political aspects. Keeping both eyes open is the more sensible proposal as it empowers one to use mathematics to predict short term movements while monitoring current news and eventualities that would effect movements on a longer term and greater degree. After all money in the FX market is made when one executes trades based on predicted movement and that prediction comes to pass.
If we correlate the forex market to an elastic object, it can go in either direction and occasionally, return to the original position. Fundamentals alter the market. The extent of the movement and its return point is predicted by technical analysis.
Hence you would be well advised not to be a believer in either style of analysis. Formidable returns are realized better when fundamental and technical analysis are utilized together. - 23208
1. The method of analysis that concerns itself with assessing the nature and the ramifications of socio-economic and political undercurrents on the FX market is called FUNDAMENTAL ANALYSIS.
2. When the analysis is centralized especially on the use of charts and graphs to study price movements and to identify trends, this is called TECHNICAL ANALYSIS.
So which is the more suitable analysis? If you check out forums and websites you will chance upon many traders heavily supporting one or the other. Those who like to lean on charts will tell you that the only way to make money with currency trading is to find out trends and jump onto them as fast as possible.
However, those who approve fundamental analysis will maintain that the solitary drivers of the market prices are socio-political and economic aspects, a fact that has been proven time and again in almost all of the movements. They describe that any interdependence between the charts and real time movements are only by chance.
That declaration should be taken with a grain of salt. While the direct and broader effects of economic changes is unmistakable, in post major announcements stage and relatively event and change free times, technical analysis may be of aid in predicting movements.
But if you place all your conviction in technical analysis, unforeseen announcements in influential financial news will presumptively catch you off guard. Since you would be relying on charts and not news, you can end up picking the least favorable time to trade. Such a contingency could be cataclysmic.
The result therefore is that short term trading can benefit from finding out trends via technical analysis while the large price movements are mostly created by socio-economic or political aspects. Keeping both eyes open is the more sensible proposal as it empowers one to use mathematics to predict short term movements while monitoring current news and eventualities that would effect movements on a longer term and greater degree. After all money in the FX market is made when one executes trades based on predicted movement and that prediction comes to pass.
If we correlate the forex market to an elastic object, it can go in either direction and occasionally, return to the original position. Fundamentals alter the market. The extent of the movement and its return point is predicted by technical analysis.
Hence you would be well advised not to be a believer in either style of analysis. Formidable returns are realized better when fundamental and technical analysis are utilized together. - 23208
About the Author:
Forex trading requires understanding japanese candlesticks graphs. To trade forex effectively you must understand forex trading strategy to stay abreast of it all.
posted by X - Men @ 2:15 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home