Fundamental & Technical Analysis in Forex Trading
Forex trading is the new fad in the investing public. You will find many new gurus in the market paddling their courses. If these gurus had been so successful at forex trading they did not need to sell forex trading courses.
These gurus will tell you that forex trading is very easy. Anyone can do it from the comfort of their homes. You only need a computer and an internet connection. No doubt, the internet revolution has made it possible for anyone to trade forex from anywhere in the world.
But these gurus are never going to tell you that 95% of the new traders do not survive more than six months. Only 5% will ever become winning traders. 95% will take the plunge on the advice of these gurus, lose their hard earned money and give up. Forex markets are unforgiving. It slaughters inexperienced traders.
Why do so many new traders fail? Simple; they dont try to educate themselves properly about forex. They will read one or two eBooks. The gurus will tell them very simple things. They will believe the gurus. Take the plunge in the stormy waters and drown in a short time.
You need to understand how the forex markets work. What are the economic factors that move the currency markets? How interest rates, GDFP growth, unemployment ratios affect the currency markets. As long as you dont develop this gut feeling, you should not start trading forex.
The best method to understand forex markets is learning what fundamental and technical analysis is. Fundamental analysis tells you how economic factors affect currency markets. What is the role of interest rates, GDP growth, unemployment figures, housing slump and host of other factors in moving the forex markets? Fundamental analysis can predict the medium to long term trend in the forex markets.
Technical analysis is a more specialized field. It studies the movement of prices in the past to predict future prices. Forex markets are ideally suited for technical analysis. If you want to become a short term trader, then you will have to become an expert in technical analysis.
Understand the indicators that are used extensively in Technical Analysis. Master them in order to determine the short term and long term expected behavior of the market. Technical analysis will also tell you what the best entry is and what the best exit point for a particular trade is. It is essential that you master technical analysis if you are really serious about forex trading.
Those who have been stock trading can switch to forex trading rather fast. But as long as you dont make forex trading your passion, you will never become a winning trader. If you want to succeed than take forex trading as a passion and learn everything about forex you can.
