There are at least two types of analysis that a trader can use in order to make a correct buy or sell decision on a currency paper. Developing your skills in at least one of them could make you an extremely profitable trader. And these two types of analysis are fundamental and technical analysis.
There is a never ending argument about which type of analysis is better, but the truth is that both can allow a trader to make money and it’s important that a trader understands them both, and makes a decision about which is best for himself so that he can become a top trader. Let’s take a look to each one of them:
Fundamental analysis is based around looking at the market’s economic, social, and political factors that affect its prices. It also looks at the economy or the currency of the country itself. In other words, fundamental analysis is looking on a case by case basis which economies are growing and which ones aren’t. This type of analysis allows you to gauge how strong an economy is and how different factors will affect it and its currency.
Technical Analysis is the analysis of the price movements to predict the future price movements. More simply said, it’s analyzing chart patterns to predict future chart patterns. The idea is to understand historical movement of prices based on these graphs and to gain insights from them to then apply on to the current chart patterns. This way we can capture big movements on prices and make profits. It also helps us determine how to look at risk and how much risk to take on.
Which one is better?
As we said before, both are important and you need to understand both. You can be an expert in only one and be profitable but will help way more and your trades will be accurate if you get to become an expert using both types of analysis.