Why are Strategies Based on Fundamental ......
by, 07-23-2012 at 04:33 AM (574 Views)
Most of the forex trading strategies that you come across are likely to be based on Technical analysis. It is almost certain that you will not find a forex trading strategy based on fundamental analysis ever. The fact is that understanding a strategy based on technical analysis is far easier than conceptualizing something based on a fundamental insight of currencies.
Technical analysis used previous data with regards to the currencies that you might be studying. Those who do a good job of technical analysis make sure that they read the numbers correctly, make charts based on rolling averages to understand the manner in which a currency is moving vis-à-vis another and much more. Some of these numbers and trends need to be observed for a few days before a specific move is made.
While moving averages do not seem tough, there are also various other kinds of currency comparisons that you can do. The Fibonacci series is one of the most common analyses that traders use in order to arrive at the right decision (read more). However, complex these numbers, equations and trends may seem, technical analysis is always easier than fundamental analysis.
Despite the fact that fundamental analysis does not really involve creating averages and equations and patterns, it is still extremely tough to understand/ The first thing is that a novice in this area is hardly likely to pick up the nuances that need to be understood. Fundamental analysis requires you to understand the patterns that have developed over a long period of time. You need to decipher the factors that a specific currency reacts to. And in all probability the factors are likely to numerous in number. Assessing the manner in which a currency will react based on employment in a country, political stability and other such non-measurable aspects, can be tough.
Only when you have a keen understanding of the dynamics in world economics can you expect to arrive at future predictions that are reliable. A keen understanding and insight of economics is also required for this option.