Fundamental and technical analysis in forex
Introduction to Forex:
Forex that is also known as the Foreign Exchange market, Trading of currency and also FX. It is a trading market that is known globally. The basic purpose of the forex market is that from all over the world people can trade currencies. It is known as the largest currency trade market, most reliable, and the daily trading volume is exceeding day by day. It allows you to sell and buy currencies, like you so in stock trading but the exception is that you can do it in anytime a day, and five days in the week. All you need is the exposure to the international markets and also access to trading.
As almost all the person depend upon the analysis of market and is considered as an essence of forex trading. There are two main schools of thoughts in the financial market, one is Technical Analysis, and the other is Fundamental analysis. For the purpose of analyzing the price action, the traders use any one of these two kinds. Now, there are two kinds of traders, one who only concentrate on the price action and they just don’t give any attention to other factors. And the other kind of traders is that they consider study all the economical factors and events that result in the market action, they prefer their efforts in fundamental analysis. So it is like two different schools of thoughts in one market, and there’s a continuous debate about it in the forex market. The traders have to pick one from these two schools of thoughts, to give you a brief knowledge about it that you will be able to choose the best analysis for yourself. Here is a complete comparison between the two that is as follows:
Difference b/w fundamental and technical analysis in forex:
Fundamental analysis is known as one of the methods of predicting the action of price and movement of the currency, all of the analysis is for the future. The analysis is based upon all the fundamental factors that includes Economics (supply and demands) the political factor that is dependent upon the policies of the government, all the factors affecting the environment like different seasons and weather changes. For Example: If we talk about the fundamental analysis traders then the best example is that if you go for shopping you look for all the shops that provide the stuff you want, you check the prices, the quality, the reliability and then you decide from where to buy and what to buy. Same is like the forex trading in the traders analyze all the factors and then take their future decisions. The other example could be that the fundamental analysis traders check the weather by different sources that it might rain in some future date or not? If it is going to rain they stay at home. So, in other words you can say that fundamental analysis is depending upon your analysis of all the factors for future and then planning for it completely.
Technical Analysis in Forex:
Now to understand the difference we need to compare the examples, the technical traders go for the hype. That means that in the case of rain they won’t depend on the weather updates or they won’t bother to analyze all the factors. But, in fact at the day when they will see that there are clouds, and it’s going to rain they stop and stay at home. Same as if they go shopping instead of visiting every shop they will just go for the shop where most of the people are. That means that they only decide by popularity and most visited.
In the forex market, the technical analysis is a way in which the past market action is analyzed. It is only concerned with the actual happenings in the trading market. It depends on the historical data through reading charts and then it is used to predict future movements of the price.
Example Of Technical Analysis Through Charts
We will focus and discuss technical analysis in details. It will help everyone to learn forex trading step by step.
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