Foreign Exchange Analysis: Which Method Is effective?
Fundamental and technical analysis are the two important mechanisms used in the FX market.
1. Fundamental analysis takes into account economic, social and political elementsand how they sway the currency markets.
2. Technical analysis however , employs graphs and charts to ascertain patterns that manifest price movement.
Choosing one over the other is not obvious. A cursory inspection of FX trading related forums and websites show traders being staunch advocates of either one of these styles. Those who choose technical analysis dispute that graphs are the solitary style that can predict way ahead of time the trends which is important to making a profit in trading.
On the other hand, the fundamental analysts will affirm that currency prices are actuated by socio-economic factors, a fact that cannot be opposed. Thus according to them, chart patterns are mere events that have no real relevance on reality.
That comment should be taken with a grain of salt. While the direct and broader effects of economic changes is incontestable, in post major announcements stage and relatively event and change free times, technical analysis may be of assistance in predicting movements.
One counsel for the technical analysis idealists is that there is a chance that they will be caught unawares should interest rates suddenly change. If the analyst does not read the news then there is a big probability that they will make a bad trading call. This can end up in a major trouble.
In the end, it is an absolute fact that economic elements are behind most, if not all of the large price movements but it cannot be renounced that there are trends that can be predicted by technical analysis for the shorter periods. So picking up these trends while being aware and up to date on current events is the most definitive way to envisage direction of future currency prices. Close prediction is of course how one makes a profit on the foreign exchange market.
Markets are sometimes chronicled in terms of elasticity as they can move in either direction and fall back to their original or another position. The factors that stretch the market are the fundamentals of socio-political and economic forces. How much it will stretch and where and when it will stay is the domain of technical analysis.
Ergo you would be well advised not to be a loyalist in either form of analysis. Sizable returns are realized better when fundamental and technical analysis are utilized together. - 23314
1. Fundamental analysis takes into account economic, social and political elementsand how they sway the currency markets.
2. Technical analysis however , employs graphs and charts to ascertain patterns that manifest price movement.
Choosing one over the other is not obvious. A cursory inspection of FX trading related forums and websites show traders being staunch advocates of either one of these styles. Those who choose technical analysis dispute that graphs are the solitary style that can predict way ahead of time the trends which is important to making a profit in trading.
On the other hand, the fundamental analysts will affirm that currency prices are actuated by socio-economic factors, a fact that cannot be opposed. Thus according to them, chart patterns are mere events that have no real relevance on reality.
That comment should be taken with a grain of salt. While the direct and broader effects of economic changes is incontestable, in post major announcements stage and relatively event and change free times, technical analysis may be of assistance in predicting movements.
One counsel for the technical analysis idealists is that there is a chance that they will be caught unawares should interest rates suddenly change. If the analyst does not read the news then there is a big probability that they will make a bad trading call. This can end up in a major trouble.
In the end, it is an absolute fact that economic elements are behind most, if not all of the large price movements but it cannot be renounced that there are trends that can be predicted by technical analysis for the shorter periods. So picking up these trends while being aware and up to date on current events is the most definitive way to envisage direction of future currency prices. Close prediction is of course how one makes a profit on the foreign exchange market.
Markets are sometimes chronicled in terms of elasticity as they can move in either direction and fall back to their original or another position. The factors that stretch the market are the fundamentals of socio-political and economic forces. How much it will stretch and where and when it will stay is the domain of technical analysis.
Ergo you would be well advised not to be a loyalist in either form of analysis. Sizable returns are realized better when fundamental and technical analysis are utilized together. - 23314
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Forex trading requires a calculation of forex profits. Forex markets move quickly, get forex trading training to keep on top of it.
posted by Mr. Forex at
1:03 AM
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