Forex trading Strategy
As in the stock market, there are two basic areas of forex trading strategy, which are Technical analysis and Fundamental analysis. However Technical analysis is by far the most commonly used forex trading strategy by individual forex traders.
Here is a brief overview of both forms of analysis and how they directly apply to forex trading:
Fundamental Analysis Fundamental analysis in the forex market is often an extremely difficult one, and it's usually used only as a means to predict long-term trends. However it is important to mention that some traders do trade short term strictly on news releases. There are a lot of different fundamental indicators of the currency values released at many different times. Here are a few of them to get you started:
- Non-farm Payrolls
- Purchasing Managers Index (PMI)
- Consumer Price Index (CPI)
- Retail Sales
- Durable Goods
You need to know that these reports are not the only fundamental factors that you have to watch.
Technical Analysis Just like their counterparts in the equity markets, technical analysts of the forex trading market analyze price trends. The only real difference between technical analysis in forex and technical analysis in equities is the time frame that is involved in that forex markets are open 24 hours a day.
Because of this, some forms of technical analysis that factor in time have to be modified so that they can work with the 24 hour forex market. Some of the most common forms of technical analysis used in FOREX are:
- The Elliott Waves
- Fibonacci studies
- Parabolic SAR
- Pivot points
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