The topic of investment advice slowly dries out, which is not that surprising, considering the fact that investing seems to be quite easy in comparison to actual trading. So today we will dip our toes not only into covering the basic aspects of trading, but we will also start preparing for the implementation of Forex trading.
The world of Forex is so vast and there is just so much stuff to talk about, but if there was to be a “trading world”, the fundamental and technical analysis would be its hemispheres. Today we will talk about the fundamental side of things.
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Two ways of looking at Forex
When working in the Forex market, traders, as a rule, use two types of analysis — technical and fundamental. The main purpose of technical analysis, or better known TA, is to analyze the graph using mathematical methods and principles. Fundamental analysis, on the other hand, includes political and economic indicators, as well as financial and credit policies of countries all around the world.
The main difference is the approach to pricing on the chart. The adherents of technical analysis believe that you should only analyse the current factual prices since they already contain all the necessary indicators and reasons for the price change. TA evaluates investments purely on the market activity surrounding them, with no looking to the actual operations or value of the company itself.
However, fundamentalists argue that prices depend on economic factors and are indicators of supply and demand.
The fundamental analysis considers phenomena in political life, economic macro- and micro-indicators not only of countries individually but, also the world community as a whole. These events affect the foreign exchange market and lead to a change in the exchange rate. As a rule, fundamental analysis is used to predict the movement of currency pairs for an extended period, while technical analysis is used to operate within shorter timeframes.
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