Forex Basics: The Technicals and the Fundamentals

Title: Forex Basics: The technicals and the fundamentals

Foreign Currency Trading

Author: Teddy

Article:


Foreign Exchange Market, FOREX, is an international exchange
market where currencies from all around the world are traded.
FOREX trades are always done in pairs, for example, USD/Euro,
USD/JPY, Euro/JPY, GBP/CHF, and CAD/USD. United States dollars,
Australian Dollars, Japanese Yens, British Pounds, Swiss Francs,
Canadian Dollars, and the Euro Dollars are the seven major
currencies traded nowadays. With an average of $1.9 trillion
daily turnover, FOREX stand as the largest trading market in the
world.

Regardless of its bulky volume of trades done daily, FOREX is
relative new to the world where the market begins at 1971 and
it's only made available to the publics since 1998. Currencies
like USD and Swiss Francs were backed up by gold previously.
Unlike in the early days when it required huge investment to
start FOREX trading, it is now an easy trading business that
trades can be done with just a computer with Internet access and
an active FOREX account. With the rise of Internet technology,
FOREX trading had become an alternative for those who are
seeking financial freedom without the hassles of a conventional
job.

More than 70% of FOREX traders lose money in FOREX market as
they traded blindly. FOREX trading involves a lot of risks thus
a well-designed analysis method is a must. To reduce these risks
to the minimum, FOREX traders, like traders in any other market,
implement Technical analysis and Fundamental analysis in their
trades.(For newbies, start learning Forex trading
here.)

The Fundamentals

Fundamental analysis basically means studies of surrounding
events that affect the market trends. For example FOREX market,
fundamental traders will consider events and situations that
will affect the value of a country currency value. These factors
include the local bank policies, political states, country
growth rates, natural disasters, market speculator's mood,
terrorism attacks, and wars.

The fundamental is commonly known as no-number analysis where
traders are investing solely on their personal reviews on
one-country economy trends. Fundamental traders normally review
a country economy's situation base on these fundamental elements
and respond accordingly. Generally speaking, natural disasters
and unstable political state poison a country's economy; thus
currency value drops. Vise versa, if a country is basically free
of natural disaster, and it's showing a steady economy growth
rate, currency of the country will be strong.

In FOREX market, it would be difficult to trade solely based on
fundamental analysis as it only provides an overall view on the
market condition. Numeric data and graphs are much needed to
give a more accurate estimation on the market movement. This
will lead our discussions to the second type of analysis method
- the Technical.

The Technical

Quoted from one of the FOREX well-established website,
www.Forex.com, Technical analysis is "a method of forecasting
price movements by looking at purely market-generated data."
(Well, at most of the time, this market-generated data means the
price of the currency) The analysis is done base on the concept
of ‘history repeats itself' and thru comparing present
situation with the past, technical analysis is quite effective
in drafting out the entry/exit price indicator.

Price charts are often the only item a pure technical trader
concerns in. Through patterns of charts, various indicators will
be generated and used for planning the investment tactic. A few
well-known indicators for FOREX traders are strength indicator,
momentum indicator, and volatility indicator. Technicians
strongly believe currency price (or any other market numeric
data) moves in trend and it will always follow a pattern similar
to the past.

Although the methodology looks secure with proven tracks in the
olden times, it would be relative unsafe to trade FOREX purely
base on technical analysis. The future does not equal with the
past. There are a lot of unexpected variables that technical
analysis does not reflect on: change of country leaders, change
of government, natural disasters, change of bank policies,
investor's mood, war-- all these factors affect currency value
directly and might not have happened before in the past. A
combined of two approaches (fundamental and technical) is always
encourage to get the optimum plots on your investment plan.

FOREX can be extraordinarily beneficial to a variety of people.
It gives huge leverage rates, it gives incompatible liquidity to
your money, it gives convenience to trade on the Internet, and
it can definitely give you a lot of money if you trade smartly.
Like any other trading business, if you are new to it, best
advice you can get is to learn and practice more before you test
your ‘wings'. Seminars, eBooks, Internet, papers, video
courses - all these are handy to get yourself ready. You can
also try out your skill on the demo account provided free. After
all, FOREX trades 24hours a day and there is always money to
make in the market, so why not be patience until you are fully
ready for it?

"It's okay to be a newbie!" Get Forex trading course
and learn Forex here
at http://www.golearnforex.net!

About the author:
"It's okay to be a newbie!" Get Forex trading course
and learn Forex here
at http://www.golearnforex.net!

Foreign Currency Trading