The basis for the successful trading strategies development in the Forex market, as in the stock markets, are two types of strategic analysis – technical and fundamental. The technical analysis has an advantage. It is more preferable for the most Forex traders who trade in individual basis.
The technical and fundamental analysis in the Forex market
The technical analysis essence is to study the dynamic changes of prices. It is carried out by the same method as in the stock markets, but unlike the latter, it can occur at any time because the Forex market works around the clock. Therefore, if a particular form of the technical analysis is somehow tied to the certain time periods, for using this form it is required to apply its modified versions that do not account for time.
The most popular technical analysis forms among traders in the Forex market are the “Elliott wave”, “Parabolic SAR0” indicator, Fibonacci tools and pivot points. About the nature of each of these forms will be discussed in other articles of this series.
The fundamental analysis is also used in the Forex market, but it is very complicated, and it is usually used, as a tool of the long-term transactions outcome forecasting. When short-term trading conduct, the number of traders are guided in their actions by the information obtained from the news, which also could be consider as elements of the fundamental analysis. Besides in the Forex market in different time the special reports of the currencies cost are formed. The study of this information can also be considered as fundamental analysis elements.
You should to know, that news and the latest reports are not the only information sources for the fundamental analysis. Fundamental nature information in the Forex market you can get at the various events held by the market administration, and even from the comments to this information. Because at such events (online conferences) are often discussed an inflation level, interest rates and other economic issues. It is clear that all of this information is able to exert a global influence on the currency market state.
The volatility of this market depends even from the small differences in the comments wording which were made, for example, by the head of the US Federal reserve about the interest rates, while keeping their common sense. The Humphrey Hawkins Hearings and events held by the Federal Committee of the open market investments could provide an important information for the fundamental analysis too.
After receiving information of the above sources, the Forex traders, who possess the fundamental analysis technique, able to predict the movement of any trends, including long-term, with high probability. Traders, who prefer to make short-term transactions, use this information to make a profit from the events affecting to the currency market which cannot be foreseen.
Recommendations for the trading strategy
To develop a successful trading strategy based on the above strategic analysis types and its debugging, a trader needs some time. An analysis could have a narrow and broad spectrum. The traders, who have succeeded in the Forex trading usually use different combinations of the technical and fundamental analyses, when create own strategy. It allows them to identify the market entry and exit points correctly, and make the long-term forecasts. Of course, any trader chooses what is necessary for him to create a successful trading strategy.
After the creating of such strategy, you should not start a real Forex trading. We recommend to test this strategy on a demo account at first. And only when a beginner will achieve a stable profit, he could open a deposit account for the real capital placement. You should to know, the impatient novice traders, who seek to start trading without a necessary experience, as a rule, suffer losses in the Forex.