Monday, November 23, 2009

A Novice Forex Traders Guide to Fundamental Analysis

If you are new to forex trading you have access to a lot of fundamental analysis as the click of the mouse from banks brokers and news wires you can look at and trade upon it - let's look at forex fundamental analysis and how to use it.
A forex trader, who made the trade based on fundamental analysis, will look at supply and demand situation in relation to the currency studied, and tried to estimate the impact of various factors on the movement and they include:

• Economic growth and economic policy

• Interest rate outlook

• Balance of payments

• Employment

• Trade Deficit

• political factors

To name but a few but there is a problem when trying to use fundamental analysis:

The facts are there for all to see, but ultimately the price is determined by millions of different opinions as you and I and we all draw their own conclusions from the facts and figures. In addition to all the news are available at any moment and this means it is a discount.

With human nature involved and the fact that fundamental analysis quickly cut almost impossible for the novice trader to execute the trade at the signal.

If you want a graphic example of how the forex fundamental analysis will not help you make money consider these facts:

The ratio of winners of losers today are the same as 50 years ago and this is better news though more and faster communications. So, if you think the trade was to think again.

A way that is much easier to learn the graph and using technical analysis.

A technical approach to take into account both supply and demand situation, and the psychology of investors. We can see the impact of both at once and reflected in the price.

Many traders do not believe that technical analysis works, because they can not take into account the fundamental but this is not true:

Technical analysis assumes that all known fundamentals will show direct price action. Technical analysis because it is just a shortcut into account the fundamental and more importantly take into account human psychology.

The equation for market movement is:

Demand and supply factors + Human perception (psychology of investors) = Price action

So, if you think about forex trading using fundamental analysis, you can save yourself a lot of time and increase your chances of success, by taking a technical approach - which reflects ALL the factors that influence the price and increase the chances of your success.

With your technical analysis on the reality of price action - not opinions and therefore trade the truth and not what you or others think it might be.

By: Monica Hendrix

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