The aim of currency trading is to profit from Forex price movement and here we will look at the two forms of analysis fundamental and technical and see which is the best. So which method is best for you? Let’s find out.
Let’s look at fundamental analysis first which is the study of the supply and demand facts to work out where prices may go in the future. By studying economic and political events, the FX trader then buys or sells upon this news.
The problem with fundamental analysis is – while we all have the same facts to look at, we all draw different conclusions from them. Traders don’t respond to news and see it logically, they respond to the emotions of greed and fear too and this means you cannot trade the news for profit.
If you look at currency markets, its not the news that’s important its traders reaction to it that is and that’s why, you see markets crash when the news is at its best and rally, when its at it’s worst.
The problem when studying fundamentals is this form of study doesn’t take into account the fact traders are emotional beings and this is where the technical analyst has a huge advantage.
If you use technical analysis, you just assume that the fundamental supply and demand situation will be reflected in price action but your not of course just seeing the news, you are seeing how every trader has traded in relation to it and the price you see gives you all the news and the trader Psychology at the same time.
If you want to win at Forex trading not only is using Forex charts a better way to trade than trying to trade the news, it also takes a lot less time too. FX technical analysis allows you to seek triple digit gains, by just following price action and is the best way to trade Forex.