Foreign Exchange Analysis: Which Method Is effective?
Two kinds of foreign exchange market analysis are there:
1. The method of analysis that concerns itself with assessing the nature and the results of socio-economic and political undercurrents on the forex market is called FUNDAMENTAL ANALYSIS.
2. Technical analysis on the contrary , employs graphs and charts to ascertain patterns that manifest price movement.
How do you determine the superior method? Research shows that traders have deep inclination for either one. The technical analysts contend that their strategy is the best for getting an early evidence of price movements.
However, those who regard fundamental analysis will maintain that the exclusive drivers of the market prices are socio-political and economic aspects, a fact that has been proven time and again in almost all of the movements. They demonstrate that any interdependence between the charts and real time movements are only by chance.
That declaration should be taken with a grain of salt. While the direct and broader effects of economic changes is certain, in post major announcements stage and relatively event and change free times, technical analysis may be of benefit in predicting movements.
If on the other hand you rely exclusively on your charts, you are likely to be caught out when a signifcant financial event such as an interest rate change is unanticipatedly announced. You were not giving heed to the financial news and left a trade open at the wrong moment. That can result in calamity.
The result therefore is that short term trading can benefit from characterizing trends via technical analysis while the large price movements are typically created by socio-economic or political aspects. Keeping both eyes open is the more sensible proposition as it empowers one to use mathematics to predict short term movements while monitoring current news and eventualities that would effect movements on a longer term and greater degree. After all money in the currence market is made when one operates based on predicted movement and that prediction comes to pass.
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 aspects that stretch the market are the fundamentals of socio-political and economic forces. How much it will stretch and where and when it will come is the branch of technical analysis.
The resolution then is that a careful trader employs both methods. So to unceasingly make profits in the forex market you must understand when to use which tool and how much importance you will give to their relevant, predicted outcomes. - 16931
1. The method of analysis that concerns itself with assessing the nature and the results of socio-economic and political undercurrents on the forex market is called FUNDAMENTAL ANALYSIS.
2. Technical analysis on the contrary , employs graphs and charts to ascertain patterns that manifest price movement.
How do you determine the superior method? Research shows that traders have deep inclination for either one. The technical analysts contend that their strategy is the best for getting an early evidence of price movements.
However, those who regard fundamental analysis will maintain that the exclusive drivers of the market prices are socio-political and economic aspects, a fact that has been proven time and again in almost all of the movements. They demonstrate that any interdependence between the charts and real time movements are only by chance.
That declaration should be taken with a grain of salt. While the direct and broader effects of economic changes is certain, in post major announcements stage and relatively event and change free times, technical analysis may be of benefit in predicting movements.
If on the other hand you rely exclusively on your charts, you are likely to be caught out when a signifcant financial event such as an interest rate change is unanticipatedly announced. You were not giving heed to the financial news and left a trade open at the wrong moment. That can result in calamity.
The result therefore is that short term trading can benefit from characterizing trends via technical analysis while the large price movements are typically created by socio-economic or political aspects. Keeping both eyes open is the more sensible proposition as it empowers one to use mathematics to predict short term movements while monitoring current news and eventualities that would effect movements on a longer term and greater degree. After all money in the currence market is made when one operates based on predicted movement and that prediction comes to pass.
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 aspects that stretch the market are the fundamentals of socio-political and economic forces. How much it will stretch and where and when it will come is the branch of technical analysis.
The resolution then is that a careful trader employs both methods. So to unceasingly make profits in the forex market you must understand when to use which tool and how much importance you will give to their relevant, predicted outcomes. - 16931
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posted by Edgar at
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