The Pros and Cons of Using Technical and Fundamental Analysis in Forex

There are basically 2 primary methods that Forex traders use to analyze the market. They are technical and fundamental analysis. Pure technical analysts will say that it is impossible to trade on the news, because the market moves so fast and whatever news out there the charts will tell you too. On the other hand, fundamentalists will say that only the news moves the market. Technical indicators are always the followers. So which methods should we use? To find out, let's look at the pros and cons of both of these methods.

Technical Analysis
Technical analysis involves tracking past currency price movements and use indicators to help identify in which direction the current price may be heading. This analysis can be performed manually or automatically. Under the automated system traders use software (expert advisor) or robot to help them find trades and identify entry and exit points. Technical traders believe that all of the required information needed to place a trade is contained in the charts.

Fundamental Analysis
Fundamental analysis focuses on key underlining economic, financial and political factors to determine the price direction of a currency. Fundamental traders believed that treaties movements, whether it becomes stronger or weaker, are related to the strength of the economy, financial and political situations. Here, fundamental reports and news are important to them. News and reports such as interest rates, employment, trade balance and…

Source by Casey K Ho

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