LEARN CURRENCY TRADING ANALYSIS

2007-03-08 10:33:40

( Business )



Are you new to foreign exchange currency trading? Better start to learn currency trading analysis before you take the plunge of the trade. Fundamental analysis and technical analysis are the two types of approaches in analyzing the market of foreign exchange currencies. Some currency traders learn to trade by either of these two approaches.

Fundamental Analysis

A currency trader who focuses his decisions to buy and sell foreign currencies on factors affecting supply and demand is following the fundamental analysis approach to trading currencies. Fundamental analysis considers the effect of political, social and economic events to the performance of a certain country’s currency against other currencies. Interest rates, economic growth indicators, inflation and unemployment are main macroeconomic indicators used to fundamentally analyze the movement of currencies in the financial market. Generally lower interest rates and high unemployment rate in a country results to lower value of its currencies.

Long term trends on performance of currency pairs can be predicted by fundamental analysis. Thus, it is a good tool to use for long term investment option for first time investors who learn currency trading. A fundamental analysis trader can also predict short term trends by being abreast with updates on economic data, news and even rumors about a country’s political, social and economic situation.

Technical Analysis

Investors who learn currency trading through technical analysis will be more interested to focus on the movement of prices of currencies in the market. Historical performance is used to forecasts future direction of prices of currencies. It relies on the prices of currencies to predict its future price. Creating charts to create a trend of currency prices is the basic tool in technical analysis.

There is little information to analyze in technical analysis that only focuses on prices of currencies as compared to fundamental analysis that requires various economic data to predict the future movement of currencies. Thus, investors who learn currency trading using technical analysis can analyze various currencies compared to investors using fundamental analysis who are limited to analyze two pair of currencies at a time.

Technical analysis is more convenient due to the shorter time it requires to implement it. Fundamental analysis, on the other hand, requires a lot of time to implement. However, doing fundamental analysis helps you specialize in economic data analysis to forecast currency prices. Whatever approach you want to specialize depends on how much time and what goals you will have.


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