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Fundamental Analysis: A Forex Trading Strategy

Cliff Teo — Thu, 05 Nov 2009 08:57:46 +0000

Forex trading is not an easy task. A trader relies heavily on analysis to make a plan on their trading strategies. This article will focus on the fundamental analysis and explain briefly how it affects the decision of a trader. A trader’s decision on when to enter and exit a trade is strongly influenced by his currency market analysis.

Forex traders look for the changes in currency prices. Using the fundamental analysis, a trader will rely on news reports to gather information about the political and economic stability of a country. Fundamental analysis looks broadly on a country’s economic condition and how this economic condition can affect its currency price.

Fundamental analysis makes use of indicators to determine how currency prices in Forex are affected by the forces of supply and demand, which in turn is affected by economic conditions. There two most important indicators used in fundamental analysis – Interest rates and International trade.

Interest rates can strengthen or weaken a currency. High interest rates attract foreign investments and can therefore strengthen the local currency. However, high interest rates tend stock market investors to sell off their shares that can weaken the stock market and the national economy.

On the other hand, international trade affects the local currency price when too much money goes out of the country buying foreign products. This can weaken the local currency due to devaluation.

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Forex Trading Strategies

Cliff Teo — Wed, 04 Nov 2009 16:48:55 +0000

Just like any trade, Forex trading also has strategies to follow in order to compete well in this complex currency market. Without a definite strategy to follow a trader will likely fail and therefore lose a lot of profits. Forex trading strategies need to be carefully studied by a trader. Forex trading strategies are based on several determining factors. These factors indicate whether a trader is in a strong position to enter or exit a trade.
There are actually two known Forex trading strategies – Fundamental Analysis and Technical Analysis. Economic or political news can be used as determining factors. Relying on these factors is one of the types of forex trading strategies called Fundamental Analysis. This strategy relies heavily on news releases. This forex trading strategy looks on how stable is the country in terms of political and economic status. It takes the value of a country as a whole instead of specific companies.
On the other hand the technical forex trading strategy relies heavily in numbers. This Forex trading strategy depends on concrete statistics. It uses charts or representations in order to evaluate and predict the trends in currency market. It studies the trending of a currency’s value. Traders using this strategy evaluate first how much money to risk before entering a trade and when to exit in a timely manner for a profit or minimal loss.

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