Technical Analysis and Fundamental Analysis
Having a profession as a trader is very necessary to be able to analyze currency movements. Traders must also be able to recognize the character of a particular currency so that they can trade and make a profit. It takes careful consideration in every decision making. For the decision making, there are two analytical approaches, namely fundamental analysis and technical analysis.
Technical analysis focuses more on what’s on the chart on the trading platform. And fundamental analysis is more based on economic factors that influence price movements in the market. There are forex traders who only refer to technical analysis for short-term trading. Some also only refer to fundamental analysis for long-term trading. There are also those who combine both to help in making decisions to enter the market and exit trading.
Then keep in mind also that it is not a chart that moves the market but the fundamental factors that cause the market to fluctuate. Currency values can be influenced by economic, social and political conditions, government policies, trade budgets, and interest rates. For example, in the financial market generally will react to interest rates and inflation rates of a country. Usually if the inflation rate rises, the central bank will try to raise interest rates to reduce the rate of consumption. With the decreasing currency circulating in the market because of the many people who invest money in banks. This can cause the country’s currency to rise.
Technical analysis or fundamental analysis?
Usually many people prefer technical analysis because it seems more simple and instant. In addition, technical analysis only focuses on what can be seen on the chart. The main benefit of fundamental analysis is to help forex traders understand trends. Fundamental analysis emphasizes economic cycles that affect price movements in the medium or long term. So, which one should be chosen? The choice of technical or fundamental analysis or both, is returned back to the needs of traders because technical and fundamental analysis has advantages and disadvantages of each.