Technical and fundamental analyses are the two forex trading strategies most often used. The technical method is the one most commonly used by traders and investors.
Analysts who make use of technical methods look at the trends of prices. They make use of particular charts and graphs to produce the information they require, such as:
- The Elliott Waves
- Parabolic SAR
- Fibonacci studies
- Pivot points
Sometimes it is necessary to combine the studies for more accurate rate predictions. The combinations most commonly used are Fibonacci studies with Elliott Waves. This allows you to create a system that will give you the opportunity to discover similar buy and sell conditions on a regular basis.
The mere notion of having to value a country can blow your mind. In the forex market, this is a very complex strategy to make use of and it is normally used for the prediction of long-term trends. Some traders make use of fundamental strategies to trade in the short-term. The fundamental methods use different indicators for analysis purposes. Some of these include:
- Non-farm Payrolls
- Durable Goods
- Purchasing Managers Index
- Retail Sales
- Consumer Price Index
These are by no means the only factors you have to watch to do your analysis. Meetings that take place on a regular basis will generate quotes and commentaries from various sources. It is possible that the outcome of these meetings has as profound an effect as some of the regular reports that are released. The most important meetings that are monitored are the ones by central banks where they convene to discuss interest rates, inflation and any other factors that could have an impact of the currency value.
To effectively do fundamental analysis, you would have to keep up to date by researching, reading, examining and doing analysis of all these commentaries and reports. It will provide you with an understanding of the long-term effects and trends in the market. It is advisable to maintain an updated forex calendar for you to keep abreast of all the dates and times of the news releases and announcements. There are certain forex brokers that offer real-time access to most of this type of information.
Develop Forex Trading Strategies
Most traders commence with the development of a forex trading strategy which they fine tune over time. Some traders place their focus on one calculation, whilst others often use a wide range to identify suitable trading. Many forex analysts suggest a combination of both technical and fundamental analysis. This will allow you to do long-term predictions, but also give you the opportunity to determine the most accurate entry and exit points for your trades.
An effective method of testing your forex trading strategies is to open a demo trading account. This gives you the opportunity to test your strategy and if it is not working efficiently, you can tweak it and retest before you start trading in a live account.
Forex trading strategies could take some time to perfect and many hours of research and analysis. It will benefit you in the long run as you will be able to make profitable trades.