As they say technical analysis says to a trader about the situation on the market and fundamental analysis gives an explanation to what is going on and gives the material to analyze in future. A fundamental analyst follows the state of economy, political events and common tendencies in the world, and makes decisions under the appearance of special news.
The basic work with fundamental data consists in the following.
* Exposure of logical chains in economy, lurking of macroeconomic situations in different countries. It is usually used in long-term operations.
*The work with news. Comparing of systematic indicators with their actual meanings. It is used in short-term operations.
The basic factors that influence on exchange rates on the Forex market:
*Crisis or unexpected events (politics, natural events)
*Expected events (finances and economy)
Life cycle of the factors of fundamental analysis
*Short — life cycle lasts not more than 24 hours a day (news during a day)
*Long — from a few weeks to several years (economic indicators, fund indexes)
Economic factors of influence of exchange rates
*The activities of economic development (gross domestic product, volumes of industrial production and so on)
*The state of trade balance, the degree of dependence on outer sources of raw materials
*The development of monetary quantity on the inner market
*The degree of inflation and inflationary expectations
*The degree of interest rate
*The solvency of a country and trust to the national currency on the world market
*Speculative operations on the currency market
*The degree of development of other segments of the world financial market, for example of the safety stock that is in competition with the currency market
These are only basic terms on fundamental analysis. You will have to read Forex textbooks to learn fundamental analysis more detailed.
Many beginning traders often think what type of analysis is more important fundamental or technical. Many would say that there is nothing to think of and fundamental analysis is primary, because a price of a currency combines of many macroeconomic indicators, political and economic state in the country, and the name speaks for itself. Actually this is true. But look at graphics. What can you see on them? You can see the wave model of Elliot. And the price is moving according to the rules of Elliot. Couldn’t you think that all the economy of the country, its politic situation along with macroeconomic indicators moves according to these rules too? Actually this is very doubtful. Any experienced trader would give you an exact answer on this question, but at the same time any experienced trader would recommend you to earn money using both types of analysis as technical as fundamental. You must think of your own strategy of using both types of analysis
As in any other sphere of our life Forex needs some knowledge.
Surely, you can start forex investment and be quite successful in it. But sooner or later the losses will come. This is when you might think “Why did I fail to start with a nice forex trading education?”
This does not imply that after reading even the greatest materials you will start closing trading positions with huge income, but this knowledge will save you from many troubles. And even if you make up your mind to get the help of a managed forex account service, still you will be able to make a much wiser decision.
And a final piece of advice – today the web technologies give you a really unique chance to choose what you need at the best terms which are available on the market. Strange, but most of the people don’t use this chance. In real practice it means that you must use all the tools of today to get the info that you need.
Search Google and other search engines. Visit social networks and have a look on the accounts that are relevant to your topic. Go to the niche forums and join the discussion. All this will help you to create a true vision of this market. Thus, giving you a real chance to make a smart and nicely balanced decision.
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Tags: currency trading, forex, forex management