Written by 
In Forex or foreign exchange trading, there are two main ways of analyzing markets and predicting trends. These are fundamental analysis and technical analysis. Some prefer one and some the other, but both have their contribution to make.
Fundamental analysis involves studying all the information about a particular country that could have any bearing on the movements of that country’s currency. These include the various leading and lagging economic indicators, political events and even climatic events such as hurricanes or earthquakes. One aspect of fundamental analysis that some traders use is the practice known as forex news trading.
This means making a trade immediately after a major news announcement that is relevant to a country’s economy. The logic is that there are likely to be major rises or falls in a country’s currency in the immediate aftermath of such an announcement, and it is possible to do this because the foreign exchange markets never close. This method of trading has the potential for huge profits, but also carries huge risks.
The other main type of analysis, technical analysis, largely relies on the use of currency trading charts, and is based on the assumption that currency prices move in trends. The ability to recognize and predict trends is essential for success in Forex trading. The most popular types of chart used are Bar charts and Candlestick charts. The Bar chart consists of a vertical line representing a time period – usually a day – and is designed to provide four specific pieces of information: the highest and lowest prices that were reached during the period, and the opening and closing prices. Candlestick charts deliver the same four pieces of information, but in a way that many people find makes it easier to see at a glance what the markets are doing.
One important function of charts is to indicate support and resistance levels. Support is the price level at which demand seems to be strong enough to prevent the price falling further, and resistance is the price level at which selling, and thus supply, seems to be sufficiently strong to prevent the price from rising further. These can be indicated by horizontal lines at the lowest and highest points on the bar chart.
Although currency trading charts are used mainly in technical analysis, they can also be useful in fundamental analysis. A chart can make it much easier to identify the effect of a particular event on a currency’s prices and its performance in the short and longer term. Learning to use charts to analyze markets and trends is a steep learning curve, but it is an essential aspect of success in Forex trading.
————————
Do not be incompetent when it comes to trading updates, get your daily dose of forex news online: http://www.freshpips.com/
There may be irreconcilable differences between forex trading reviews that you read at times: http://www.reviewpips.com/
