Most FOREX traders rely on analysis to make plan their trading strategy. This article will discuss fundamental analysis. The other common form of analysis is technical analysis. After reading this article you should have a better understanding of fundamental analysis and how to use it as part of your FOREX strategy.
Political and economic changes are the basis of fundamental analysis. These can frequently affect currency prices. Traders that take advantage of fundamental analysis will gather their information from a variety of news sources. They are looking for information about unemployment forecasts, political ideologies, economic policies, inflation and growth rates.
Fundamental analysis will provide you with an overview of currency movements and a broad picture of the economic conditions. Most traders then will combine their fundamental analysis with technical analysis to plot actual entrance and exit points as well as confirming the information provided by their fundamental analysis.
Just like most markets the FOREX market is controlled by supply and demand. Many economic factors can affect the supply and demand but the two most critical ones are interest rates and the strength of the economy. The over all strength of the economy is affected by changes in the GDP, trade balances and the amount of foreign investment.
There are many economic indicators released by government and academic sources. These indicators are usually released on a monthly basis but will sometimes be released weekly. These are pretty reliable measures of economic health and are closely followed by all traders.
There are many indicators that are released but some of the most important and commonly followed are : interest rates, international trade, CPI, durable goods orders, PPI, PMI and retail orders.
Interest Rates - can cause a currency to either strengthen or weaken depending on the direction of movement. In some cases high interest rates will attract foreign money, however high interest rates will frequently cause stock market investors to sell of their portfolios. They do this believing that the higher cost of borrowing money will adversely affect many companies. If enough investors sell of their holdings in can cause a downturn in the market and negatively affect the economy.
Which of these two affects will take place depends on many complex factors, but there is usually an agreement among economic observers as to how the current change in interest rates will affect the general economy and the price of the currency.
International Trade - If there is a trade deficit (more items imported than exported) it is usually considered a negative indicator. When there is a trade deficit it means that more money is leaving the country to buy foreign goods than is entering the country and this can have a devaluing effect on the currency. Usually though trade imbalances are already factored into the market consideration. If a country normally operates with a trade deficit then there should not be an affect on the currency price. The currency price will normally only be effected by trade differences when the deficit is greater than the market expected.
The measurement of the cost of living (CPI) and the cost of producing goods (PPI) are a couple of other important indicators. You should also watch the GDP which measures the value of all the goods produced in a country and the M2 Money Supply which measures the total amount of currency for a country.
In the US alone there are 28 major indicators, these can have a strong effect on the financial market and should be closely watched. This information can be found many places on the internet and is provided by many brokers.
source : http://www.forexarticlecollection.com/fundamental-analysis/forex-fundamental-analysis.html
The Elliott Wave Principle, developed by Ralph Nelson Elliott in 1930s and 40s, is a powerful analytical tool that is still being used for forecasting stock market behavior. The basic concept of this Principle is that stock market prices rise and fall in distinct patterns and that those patterns can be linked together into waves.
Since it was first published, this classic guide to the Elliott Wave Principle has acquired a cult status globally among technical analysts. With subsequent new editions, the contributors have refined and enhanced the message of the original publication while retaining all the predictions from past editions.
Elliott Wave Counts may be summed up as follows:
Wave 1 is normally the most weak of the impulse waves. It is based on short covering of the bears from a previous move. The next Wave is created at the end of the first Wave and after the currency pair is sold off.
Wave 2 comes to an end when the market fails to make new lows.
Wave 3 is the most lengthy and most strong of the impulse waves. This leads to strong currency buying or selling in the trend's direction that usually starts slowly, but tends to accelerate as it breaks to new highs above the top of Wave 1.
A correction will occur, especially after a strong trend. Traders will then start making profits, paving the way for Wave 4.
Again, the currency pair will rally ushering in the Wave 5 rally. This Wave is usually supported by the retail traders and not institutional buyers and tends to lack the momentum generated in the third Wave.
This is in a nutshell Elliott Wave analysis can be deployed to enhance traders forex swing trade evaluations. A closer look into the Elliott Wave theory and other strategies could be useful for traders and enable them to use these as tools for increasing their forex swing trade opportunities.
When evaluating the Forex market for swing trade opportunities, the focus should be placed on forecasting directional changes for a given currency pair, relying on technical analysis. In this analysis there are different indicators. The most reliable tool used to predict Forex market swings is Elliott Wave analysis that can be used to identify trends and countertrends, continuation and exhaustion of trends and also to evaluate the potential of pricing targets of a trend.
Elliott strongly believed that the market's movement was a direct result of the mass psychology of the time and that the stock market is a fractal that is an object similar in shape, but at different scales. An apt example of a natural fractal is a stalk of broccoli. The stalk and individual branches look strikingly the same because the branches are smaller in scale. According to Elliott this mass psychological move resembles the herding tendency in human beings.
Summing up, the market price actions are not the cause of economic growth or slow down, but the reflection of the mass psychology of investors. If the mood of the investing public is upbeat then a bull market ensues. This is counter to what most individual perceive, that is because there is a bull market the mood of the investing public is upbeat.
here are proven ways to make money trading Forex and this website is dedicated to showing you the things that you really need to know to profitably trade the currency market.
There are no big secrets to uncover and you don't need to be a rocket scientist to succeed either. There are no "born traders" so if someone else can do it, so can you!
Many new traders buy "money back guaranteed" systems promising incredible results. The reality is most of those systems won't work that well for the majority of new traders. Often these systems are derived from stock or futures programs and simply don't suit the dynamics of the Forex market.
There is more to currency trading than waiting for some moving averages to cross, betting the farm and setting a 30 pip stop-loss order. If that's all there was to it, everyone would be doing it. That being said, we all need to start someplace and a complete packaged system is a good place to get your feet wet.
My current focus is on automated trading systems and trading robots. Many "would be" new traders are overwhelmed by all the information available and don't know how to get started. These automated systems can successfully trade your account, even if you have a very limited knowledge of the Forex market.
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The biggest part of learning to trade Forex is you need to realize trading is about dealing with probability. Certain methods will give you an edge which will help swing the odds of success in your favor.
Trading Forex is exciting and it can also be very rewarding. You are able to trade any time of the day Monday through Friday and it can be done effectively without being glued to your computer screen.
To make money trading Forex, there is information you need to know. There are a few key sources professional traders use and once you discover which methods work best, you will be ready to build "your" system.
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The reality is you're going to have to do a little homework to be successful at this. You can learn how to claim some cash from the $3.2 trillion (according to BIS in Sept/07) that trade through the Forex market every trading day, but to make money trading Forex, you need to treat it like a business and invest some of your time to achieve profitable results.
In the end, the results you get will be the product of the time and effort you put in. Do this the right way and it can change your life. If you are looking to get rich quick, Forex can do it, but it can break you just as quickly, so beware.
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Typically, 95% of traders who open accounts to trade the currency market will lose all of their "investment". However, with a proper strategy, you can become a member of the successful 5%.
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