Intermediate FX Trading
The Types Of FX Trading
When you are talking about Forex markets there is two types of FX trading out there, the fundamental trader and the technical trader.
There are endless arguments as to which is the best FX trading method. Both offer different advantages but the vast majority of forex traders are technical traders. I guess humans just like to analyze.. So what is the difference between the two FX trading methods?
FX Trading, Fundamental Analysis
Fundamental FX trading analysis is examining the economic, social and political forces that affect supply and demand and hopefully predict the Forex market movements. The fundamental FX trader will look at whose economy is doing well, and whose economy is not so good. The theory is that if a country's economy is doing well, their currency will also be doing well and if the country's economy is going badly the currency will be suffering. The better a country's economy is, the more trust other countries have in that currency and the FX Trading value goes up.
Fundamental analysis is a method to predict the forex markets by analyzing how well a countries economy is doing.
FX Trading, Technical Analysis
On the other hand, technical FX trading analysis has nothing to do with the countries state of affairs. Technical analysis is the study of charts. It is that simple. No studying the countries' economies or news in the country or anything. FX trading with technical analysis is based on math and the fact that charts will show patterns. To a certain extent the FX technical trader believes they can determine where the price will go. By looking at charts, you can identify trends and patterns in the forex markets and FX trading becomes easier.
In technical analysis the key is to find a trend in the charts. When you can find a trend and act, the FX trading becomes profitable. Technical analysis can spot the trends at an early stage and therefore allow you to make as much profit as possible.
So which type of FX Trading analysis is better?
There are traders that swear by both methods of FX trading. Both types of analysis are effective if used correctly. If you read the financial newspapers then you are inadvertently doing fundamental FX trading analysis. If you look at charts and spot an upwards slope then you have just done technical FX trading analysis.
Obviously it can be far more complex than this but this is a simple overview, Use both methods and you will be well on your way to big forex profits. Get out there and practice, it's the only way to successful FX trading!