Tuesday 8 January 2008

How do I decide if a currency will go up or down?


In the last couple of posts I mentioned using Technical analysis and/or Fundamental analysis to decide whether the price of a currency pair might go up or down.

I said "and/or" because the two are not mutually exclusive. The majority of those who are successful in Forex trading make use of both types of analysis. However, some people prefer Technical analysis, while others are big supporters of Fundamental analysis.

Technical analysis is a method of predicting price movements and future market trends by using charts to identify what has already happened. It is concerned with actual price movements, not the reasons for them. Fundamental analysis uses more wide-ranging factors such as political or environmental events, or anything in the country concerned that could have an effect on currency movements.

Technical analysis is without doubt the easiest and most precise method of foreign exchange trading. It is based on three principles:
1. The price of a currency already reflects everything that is known to the market that could affect it.
2. Prices move in trends, so analysing the patterns of current behavior is very effective.
3. Patterns repeat themselves.

If you use Easy-Forex, you will get very detailed tutorials in both types of analysis. You will soon discover which suits you better, or whether you are happy using both. But you will not be able to succeed in Forex trading without at least one of them!

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