TECHNICAL AND FUNDAMENTAL ANALYSIS
Technical and Fundamental analysis are two types of Forex trading types. Learning how to use these types of trading is a necessary step for any Forex Trader. In this article we will present a description of each one, we want to open a door for future research on your schedule.
Technical analysis is a discipline dedicated to predict future currency prices based on information contained from the past market data. Charles Dow (Founder of The Wall Street Journal and the Dow Jones & Company) was a pioneer in technical analysis in the 19th Century, he strongly believed in the ability of Data to predict the future. Technical analysis means, using the Chart Indicators available on your MetaTrader 4 Forex Software. This type of trading uses mathematical models, taking information from the prices and volume traded in the past; one of the most important aspects here is, to determine how far into the past shall we enquire to predict the future, how much time market conditions remain constant: Prices from one year or one day ago will help us to predict actual and future prices? Remember that each Forex Indicator is the graphical expression of a mathematical model: you don`t have to be an expert mathematician to be a good Technical trader, you just need some time of strict research to understand each tool in your Forex MetaTrader Tradeview.
Fundamental analysis is a discipline based in anticipating currency price trends, using the main Economical and Political events on each country for this purpose. If a fundamental event affects in a positive way the wealth of any country, we suppose that the currency traded in Forex for that country will be Appreciated (Price Increase) against the others. If a fundamental event affects in a negative way the wealth of any country, we suppose that the currency traded in Forex for that country will be Depreciated (Price Decrease) against the others. For instance if the USA Department of Labor announces a decrease in the unemployment rate, this means that the USA Economy is on a great moment and we will expect an increase on the relative price of the Dollar. It is just a simple example that will help you understand this basic idea, you should be aware of making this simple analysis without considering other economical and political forces that affect currency prices in different times. Some good sources to find daily, fundamental currency news are: Bloomberg, The New York Times and The Economist.
A Forex Trader must know both types of trading types and use them frequently. You should not focus yourself in just one of them, imagine each type as one of your eyes, usually you use both!