The Advantages and Disadvantages of Using Forex Technique and Fundamental Analysis

There are basically 2 main methods that Forex traders use to analyze the market. This is a technical and fundamental analysis. Pure technical analysts will say that it is impossible to exchange news, because the market is moving so fast and regardless of the news out there, the charts will also tell you. On the other hand, fundamentalists will say that only news moves the market. Technical indicators are always the followers. What are the methods we should use? To find out, let's look at the pros and cons of both of these methods.

Technical analysis

Technical analysis involves monitoring past changes in currency prices and usage indices to determine which direction the current price may be headed. This analysis can be done manually or automatically. In the automated system, traders use software (expert advisor) or robots to help them find transactions and identify entry and exit points. Technical traders believe that all the information needed to place a trade is contained in the charts.

Fundamental Analysis

The basic analysis focuses on key economic, economic and political factors that determine the direction of a currency's prices. Fundamental traders believed that currency movements, either getting stronger or weaker, were linked to the strength of the economic, economic and political situation. Therefore, fundamental reports and news are important to them. News and reports such as interest rates, employment, trade balance and GDP are very important. Other information such as retail sales, durable goods, home sales and ISM will also affect price movements.

Technical analysis

Advantages

-Helps you provide a specific entry and exit point for traders during trading.

-Mapping can offer everyone an easy way to identify trends right away. This is possible because the same data is also monitored by millions of traders, as a result, if a large number of Forex traders do the same, this will create a self-fulfilling prophecy to further the trends.

-Includes charts and pointers. It is undoubtedly the easiest and most accurate method used by many marketers to date.

Maps and tools can also sometimes help to pinpoint when a trend is about to start or end. Therefore, help traders plan their profits and stop losses more accurately.

Disadvantages

-If many traders place their stands around the same areas, this could trigger a price reversal, as it could potentially allow larger market players to deliberately cause these stops.

The tools used are basic lag indicators. It may be dangerous to rely entirely on the assumption that the current price and trend will predict future prices. They often do, but not necessarily.

-Saving maps means that you cannot receive other messages that may change the voltage.

Fundamental Analysis

Advantages

-Basic analysis increases knowledge and understanding of the world market. So help us get a clearer picture of the overall health of the world economy.

– We can use fundamental analysis to explain some of the unexpected price movements. Therefore, you know what drives prices higher or lower.

– Larger news releases can sometimes cause high prices when there is a big difference between expectations and actual results. If you can predict and record this price movement, it can be very profitable.

– Financing analysis is best used to predict longer-term exchange rate fluctuations.

Disadvantages

-There is so much information that one can easily be confused.

-It is very difficult to use all this information to identify a particular point of entry or exit.

-Some short-term news releases can give a false message and mislead the trader into opening a trade. This brand often develops a knee-jerk reaction on the market.

– Sometimes the information or news that is circulating may have already been invoiced to the market. Therefore, information does not have a significant impact on price movements.

It requires a person with at least some basic knowledge of the financial background.

-New releases can sometimes cause dramatic and rapid price movements for a pair of currencies both upwards and downwards as the Forex market tries to digest the news. Threat traders can find themselves in a series of losses.

conclusion

In my opinion, there is no ideal or better method of Forex analysis that will guarantee you a 100% results all the time. Technical analysis and mapping will help short-term traders to make their own decisions, while long-term traders will need to keep track of the latest economic news and currency data of the countries traded. Note that these methods of analysis are simple tools. If used correctly, it can generally help you make transactions more efficient. This is why most Forex traders tend to use both analytics approaches to make trading decisions.