Forex Charting – Use Fundamental Analysis and Technical Analysis to Win Trades

There are two types of analysis used in the Forex market – technical analysis and fundamental analysis. Both types of analysis will result in different charting predictions. Many traders tend to stick with just one type of analysis and may win a decent number of trades. However, by understanding how both types of analysis interact, you significantly increase your winning trade percentage.

Fundamental analysis deals with the economic, political, and social data that influences the strength of a currency while technical analysis deals specifically with currency price movements. Technical traders rely on charting trends to predict future currency price movements while fundamental traders make their decisions based on news reports released by governments etc.

Both styles of trading can be effective, although to maximize trading opportunities, a successful Forex trader needs to understand both Forex charting trends and how news reports can influence currency movement away from trends. It sounds complex and many traders opt to stick with one style of trading… maybe it is why 95% of Forex traders lose money, or maybe that is a coincidence.

For example, if you rely solely on technical analysis and your favorite trading indicator has identified the start of a basic trend, you are convinced this is a great trading opportunity and quickly enter into a trade. However, shortly after placing your trade, there is a sudden 40 pip drop and you hit your stop-loss figure. You are scratching your head and puzzled why it took the sudden downturn.

If you had been monitoring the Forex news reports due out that day you would have fully understood as it just happened to announce interest rates had been lowered. You would have lost a substantial amount of money by ignoring fundamental analysis and been guilty of relying too heavily on technical analysis.

The moral of the story is to fully understand Forex charting; you need to examine both fundamental analysis and technical analysis. It is even more crucial that you understand which types of fundamental analysis will impact on currency pairs you are trading if you rely on automated Forex trading robots as they are predominantly configured to identify trends through technical analysis.

Automated Forex trading robots can serve a very useful purpose if you use them wisely and know when you should manually take control. There are certainly plenty of trading robots available nowadays and I am currently evaluating some of them to see whether they can complement my preferred trading style.

Source by Brad Nivek