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Understanding Basic Forex Strategies – Fundamental Vs. Technical
A person that is new to the world of FOREX trading needs to understand the difference between the two basic trading strategies. Fundamental and technical strategies are quite different from each other and a person needs to stick with one plan. Technical analysis is the more common strategy used by FOREX traders, likely due to its more simplified form. An overview of both strategies is provided below for an accurate understanding:
Fundamental Analysis – A person that has decided to use this style of analyzing is essentially putting a value on an entire country, a much more difficult decision. This style of analysis is much harder for a person to learn and is often left for only long term trend prediction. It may at times be used on the short term and several different indicators come in the form of news releases. These include the Consumer Price Index, Purchasing Managers Index and many other indicators. There are also timely meetings that affect the markets. A person that is using this strategy needs to be aware of these different meetings and how the discussion of interest rates, inflation and other issues will affect currency values in the country and around the world. The two most important meetings that affect currency values are the Humphrey Hawkins Hearings and the Federal Open Market Committee. An understanding of these two meetings will allow a FOREX trader to foresee long and short term trends. An economic calendar will keep a person aware of the times that these reports are issued and is essential for anyone following this strategy.
Technical Analysis – This is far more common of a strategy for FOREX traders. Analyzing price trends is done on a 24 hours basis since FOREX markets are open around the clock, unlike the equities markets. Since FOREX markets run on a 24 hour cycle, adjustments must be made toany technical analysis that are limited by time factors.Three common styles of analysis include the Fibonnaci Studies, Parabolic SAR Pivot Points and the Elliot Waves. These are all basic strategies of their own and must be decided between. The best place for a beginner to start is with the one that makes them most comfortable. A quality broker will help to explain the differences and help a person to choose the right one for them and their circumstances. Being comfortable with an investment strategy is the only way a person will ever get started.
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