Forex Analysis

Here at ForexOnlineLearning we tend to favor fundamental analysis; however, we do see some short-term value in technical analysis, as well.

Even though this website is written from the view point of a fundamental forex trader, we understand that information and knowledge is the key to success in forex trading. We cannot simply say that one type of analysis is better than the other, nor do we think that you should “pick sides” before testing both for their own pros and cons.

Additionally, we believe that forex market participants, regardless of their views on analysis, should understand both fundamental analysis and technical analysis. Understanding both allows us to make sense of the various headlines that surround the foreign exchange market, and to make good decisions based on the information that we read and synthesize.

As a general rule of thumb, technical analysis is easier to understand because it uses only one source to decide good and bad trades: prices. The study of technical analysis will also help us to reinforce the key items you learned in the first sections of this guide on forex trading.

Thus, the 5 chapters that follow this article will emphasize technical analysis before we dive into fundamental analysis.

Basics of Technical Analysis

Technical analysis centers around the concept of an efficient market. In an efficient market, the technical analysis says that he or she cannot have access to market moving data faster than any other trader, and that all news, commentary, or events are already priced into the market.

Therefore, the technical trader seeks to make money in forex by predicting movements based on previous trends.

Basics of Fundamental Analysis

Fundamental analysis says that the trader or investor can make a profit in forex by staying on top of major market developments and simple economics. In general, fundamental analysis looks to trade profitably based on macroeconomic factors (economic events that affect different countries in a large scale.)

Fundamental analysis generally ignores the relationship between price trends and future movements. Fundamental analysts spend more time reading the news, looking for major developments, while seeking to understand how economic events and market happenings may affect future price.