FUNDAMENTAL AND TECHNICAL ANALYSIS

I was studying about fundamental and technical analysis recently, fundamental and technical analysis are the two broad schools of thought.

FUNDAMENTAL ANALYSIS

Fundamental analysis or economic fundamentals analyzes the strength of a currency by its country’s economy. Simply put, GOOD economy = HIGH exchange rate of currency, BAD economy = LOW exchange rate of currency. Fundamental analysis analyzes all the various sectors of an economy, political, social and economic sectors and activities in a country in relation to its currency. For example the U.S Dollar (USD): Using fundamental analysis to analyze the U.S Dollar I would look at the U.S economy; how is the economy? What is the U.S Gross Domestic Product (GDP)? Supply and demand of all goods and services, distribution and consumption by individuals and by business. I will analyze how major financial decisions affect the economy, it’s monetary unit etc.

I believe in a nutshell this is what fundamental analysis is all about.

TECHNICAL ANALYSIS

In lay man’s terms technical analysis = charts. Technical analysis involves analyzing the  market price movement of various currencies’ by using charts. Charts help identify trends and patterns so I can spot trading opportunities. Technical also involves using other technical indicators to trade the Forex market.  

Thanks for reading.