Forex Strategy: Fundamental Vs Technical Currency Analysis

Chances are, if you're just getting started analyzing currencies, you have a long list of questions: What is currency analysis? What are the different ways to analyze Forex assets? And how will my analysis inform my trading efforts? These are important questions to answer, and it's probably best to start with a quick definition of currency analysis.

In the simplest terms, currency analysis is the research of economic factors that affect exchange rates, as well as researching historical market data. Essentially, a day trader's goal is to extrapolate the future movement of a particular currency by analyzing market factors and economic data. This will help a day trader make better guesses as to whether a currency pair will lose or gain value.

Fundamental Currency Analysis

There are many different macroeconomic factors that can affect the value of a currency and its exchange rate. Fundamental analysis looks at these factors to determine the overall well-being of a country's economy, because economic standing is a strong determinant of currency value. Some factors a fundamental analysis might consider include:

Inflation rates

Trade balances

GDP

Interest rates

And job growth

In effect, the goal is to get a gauge of the overall economic factors that may affect that country's currency. For example, a country with an increasing inflation rate may experience a decrease in currency value. A Forex trader might then enter a trading position betting on the downward trend of that currency. It's important to note, though, that it's difficult to trade on fundamental analysis alone. Most frequently, a trader will also need to conduct technical analysis.

Technical Currency Analysis

With the advances in technology, day traders have access to a wealth of Foreign Exchange market data. Technical analysis is the process of digging into this data to reveal market behaviors and price patterns. This analysis can be carried out over long periods of time - say a year or more - or in short, 4-hour time periods.

Forex trading software can be a useful tool for improving the insights yielded by technical analysis. For example, many Forex trading applications today are designed with advanced algorithms that measure these behaviors and price patterns in real-time, effectively automating the process of picking trades. One advantage of this type of analysis is that day traders have better knowledge of when to enter and exit a particular position.

Fundamental vs. Technical Analysis: Which is Better?

Ask any day trader what they prefer, and they'll likely say they use a combination of both. When used together, fundamental and technical analysis yield greater insights into the market, as another layer of data is added into the equation.

We can break it down further. For example, let's say a country just elected a politician who wants to enact a quantitative easing program. This program has the potential to weaken the value of the currency - that's a valuable piece of fundamental analysis. Combining this data with a technical analysis of that country's currency - long-term and short-term trends - will help you best determine the positions that will be most beneficial to you.

Interested in learning Forex trading? Enroll today in the Learn Forex course from Learn To Trade; you'll polish your fundamental and technical analysis skills, learn new strategies for minimizing your trading risk, and develop better knowledge of the Foreign Exchange market.

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How to Trade Forex Inside Bars

An inside candle/bar is an important price action pattern. A simple definition of this pattern is when the price action of a single bar or candle is inside the one prior. Thus it is referred to as AB pattern or a two bar pattern, meaning it has an A bar and a B bar.

What It Represents

The pattern is a major signal to the trader that continuation or reversal is about to occur. It represents a time of consolidation or indecision.

They typically occur as the market consolidates after making a big directional move. This means that the inside candle can occur at key decision points and at the turning points in the market such as at resistance/support levels.

It reduces the risk in entering a trade or in a logical exit point. The pattern can be used as continuation signals or as turning point signals.

While they can be used in the two scenarios, those used as the continuation signals are easier and more reliable for a beginning trader to learn. The reversal signals or turning points are best to leave them alone till you've some adequate experience as a Forex price action trader.

How to Trade this Price Action Pattern

Many traders look at the pattern as reversal patterns thus hypothesizing that after the price has either trended down or up for an extended time; the pause in the price's movement precedes a reversal of the trend. In this situation, it is viewed as a short term swing or trade in the counter trend direction.

However, there is another great away to play inside bars - this is rooted from what the candle isn't telling us.

Most of us when we have a look at the pattern form on the charts, we see a low price and a high price that's inside of low and the high of the day before. This can be viewed as a trader's unwillingness to push the price higher or lower for a couple or reasons.

Perhaps a pertinent report is to be released soon or perhaps the market had made a stratospheric leap and the traders are tepid on bidding the price higher or lower.

So, what is the candle not telling us?

The candle is not telling us that many traders are bidding price higher or lower and that the traders are waiting before taking the next big move in the assets. To traders, that means opportunity.

Breakouts Opportunities

We do have situations in which we all know the volatility has reduced, particularly when the inside Forex bars take place in a pro-longed trending move; we can look to trade breakouts so that when either a high or low is established we look to get in trade.

Traders who are utilizing the strategy above, are looking to trade the breakouts, which many traders in the Forex market look to when they want to take an advantage of the long term and strong trending moves in the market.

Many traders are looking for the volatility to increase, with the previous high or low being broken so that their strategy can initiate its entry.

Many inside patterns can aid the traders set up cumulative positions, for example, accumulating many positions every day based on the trader's criteria. Once the breakout happens, the profit potential becomes significantly higher.

Conclusion

The clarity of inside day breakout setup and patterns added with a lower underlying risk, provides a popular strategy for FX trading. Before trying a trading method, traders are advised to research carefully before eventually choosing an asset.

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Forex Technical Indicators Can Damage Your Trading

The majority of Forex traders rely on technical indicators, and have been doing so since retail Forex trading was introduced. Typical indicators like Fibonacci, stochastic, and RSI type indicators have been around for many years, and are in widespread use, but are totally worthless. This is because these indicators measure the wrong quantities.

Forex traders use these indicators because they are readily available on their trading platforms, so they presume that these indicators are valid. But Forex traders need to move on from these antiquated indicators and start evaluating smarter systems that represent what is actually going on in the Forex market. Smart trading systems that operate in real time give Forex traders the intelligence they need are available now that are far superior to the standard technical indicators in wide use. Forex traders need alternatives but most traders don't know about these systems.

It is now possible to have a real time Forex system that points you to the correct pair to trade, improves accuracy, and will turn you into a profitable trader. These "smart Forex trading systems" are available to any trader to use and are much easier to interpret than the standard indicators.. Thorough techniques for performing the proper analysis and evaluation of the Forex market across a wide range of pairs can supplement these smart trading systems. If you combine both you can have a powerful trading system for leveraging the trends of the market, while having accurate entry signals. Real time intelligence for Forex traders is here now, but very few Forex traders have been exposed to these types of systems.

These newer Forex trading systems will far outperform the widely used technical indicator systems which are not only outdated, but can be combined into an infinite number of combinations. All of these combinations of technical indicators can take years to properly test and properly demo trade, causing frustration for most traders. Standard technical indicators have various time frames and period adjustments which results in thousands of possible combinations.

Forex traders are in desperate need of better choices for their trading system, they need effective trading systems. Using standard technical indicators for Forex trading is widespread but these methods are antiquated. Forex traders know these systems are only valid for scalping a few pips here and there. Traders are looking for choices and alternatives to these systems. We suggest you make sure your trading system is reliable and accurate before trading the leveraged spot Forex market. The best Forex indicators is the market itself, not indicators.

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The Idiot's Guide To The Best Forex Trading Education Secrets

ts Individual traders can earn substantial profits on the Forex market. Through research, effort and following good advice, someone can make a good return on their investment. When learning the basics of Forex trading, an investor must be able to draw on the experiences of other traders. This article offers a number of useful tips and guidelines for Forex trading education.

Track financial news daily to keep tabs on the currencies you are trading. Speculation is the name of the game, and the news media has a lot to do with that. Try setting up a system that will send you a text when something happens in the markets you're involved in.

If you're new to Forex trading, one thing you want to keep in mind is to avoid trading on what's called a "thin market." Thin markets are those with little in the way of public interest.

Sometimes changing your stop loss point before it is triggered can actually lose your money than if you hadn't touched it. Just stick to the plan you made in the beginning to do better.

When people first start in the Forex markets, they often let their greed blind them, resulting in losses. Other emotions to control include panic and fear. All your trades should be made with your head and not your heart.

Research the broker you are going to use so you can protect your investment. Pick a broker that has a good track record and has been at it for five years.

Never let emotion rule your strategy when you fail or succeed in a trade. Vengeance and greed are terrible allies in Forex. You need to keep a cool head when you are trading with Forex, you can lose a lot of money if you make rash decisions.

Automated Forex programs and eBooks detailing fool-proof systems are not worth your money. Nearly all products like these give you an untested and unproven program. Ultimately, the only people involved in these transactions who end up any richer are the sellers. Instead of wasting money on possibly dubious products, spend that initial amount of money on a Forex trader who can teach you what you need to know.

As mentioned in the beginning of this article, information and advice from experienced traders is important for new and less experienced traders. The great advice in this article can benefit anyone who wants to learn more about Forex trading. A trader who is willing to put in the effort in Forex trading education and listen to advice can reap huge rewards.

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