The main difference between vs of the Forex trading market is that, while fundamental analysis uses economic, political, social and other factors that affect supply and demand of the trading Forex market to foresee price movements, technical analysis uses mathematical and graphical charts of previous market action, in order to analyze the Forex trading market.
The basic difference between Forex fundamental and technical analysis is therefore that:
- Forex Fundamental analysis uses various factors that influence supply and demand to predict the currency change.
- Technical analysis uses charts of previous currency change to predict the currency change.
Cause and Effect of Market Price - Forex Fundamental analysis looks at causes of currency change. Forex Technical analysis looks at effects. Fundamental analysis causes, such as government policy, can later be seen in the technical analysis charts that constitutes the effects of the certain policy.
Types of Analysts - Fundamental investors would research a currency from top to bottom, looking at interest rates, balance of trade, the gross domestic product, unemployment and other economic factors, in order to see if a certain currency is about to rise or drop in value. Technical investors, on the other hand, would look at the price action of the Forex trading market, and view chart details such as open, high, low, close, volume and open interest for the currency price of a certain time to notice changes in the currency. This is why fundamental analysis is more suited for long term Forex forecasting, while technical analysis foresees short term changes in the Forex trading market.
Combination analysis - The most recommended method of Forex trading is to use both fundamental and technical analysis together. This way, you can study fundamental analysis of a currency, and find out what are its economic factors and what is its future direction. After this you turn into technical analysis, and study those currencies charts, trying to see the right timing to step in, and buy/sell the certain currency.
After using both types of analysis you can be sure you are covered both ways, and you can now turn towith the confidence that you know what currency to trade with, and when to trade as well.
Jim Barns, Market Analyst
Sunday, February 8, 2009
Forex Economic Indicators
The execution of in the Forex market is done through the use of economic indicators. These indicators point to the state of some economical factors in the country whose currency you wish to trade with.
Economic indicators are published by various sections of the government and private companies. These statistics are analyzed by market investors to predict the direction of the . Forex economic indicators are published at fixed time intervals, and are followed by any serious online Forex trader.
Since so many people are tuned to use them, Forex economic indicators have a large impact on prices of currencies of the Forex trading market. Most traders do not use fundamental analysis because economic indicators seem difficult. This however is wrong because following simple guides can help you stay updated with the important Forex economic indicators easily.
Starting to use Forex economic indicators
To get started, you should first keep a log of all the important Forex economic indicators' release dates. Keep a log or make a subscription to one of the economic journals, so you'll know the most important factors of that time. If you are trading in JPY, the Forex economic indicators need to be relevant to the currency type, of course.
Each economic indicator tells you about a different aspect of the economy, and this should be translated in turn into the predicted movement of the currency price. Make sure you understand which aspect the indicator is about. For example, know that the GDP measures the growth of the economy while the PPI . Don't worry, with some experience this will come naturally.
Different indicators have changing importance, according to the country's currency. Some currencies might have inflation indicators as key economic indicators while others will have employment rates as key indicators. This is also something you should find out and read about at various books and online guides.
There are leading economic indicators, which change before a particular Forex trend is set, and lagging indicators, that change after the economy had begun to follow a certain pattern. Both indicators should be used, depending on the currency's situation.
Major Forex Economic Indicators
The Gross Domestic Product (GDP) - The sum of goods and services produced by domestic or foreign companies.
Industrial Production - A measure of the production change, industrial capacity and resources of a country's factories, mines and utilities.
Purchasing Managers Index (PMI) - A monthly index of a country's manufacturing conditions, including new orders, supplier delivery times, inventories, prices, employment, export orders, and import orders.
Producer Price Index (PPI) - A measure of price changes in the manufacturing sector.
Consumer Price Index (CPI) - A measure of the average price level paid by urban consumers for a fixed basket of goods and services.
Employment Cost Index (ECI) - A measure of the number of jobs in more than 500 industries in all states and 255 metropolitan areas.
Tania Raven, Market Analyst
Economic indicators are published by various sections of the government and private companies. These statistics are analyzed by market investors to predict the direction of the . Forex economic indicators are published at fixed time intervals, and are followed by any serious online Forex trader.
Since so many people are tuned to use them, Forex economic indicators have a large impact on prices of currencies of the Forex trading market. Most traders do not use fundamental analysis because economic indicators seem difficult. This however is wrong because following simple guides can help you stay updated with the important Forex economic indicators easily.
Starting to use Forex economic indicators
To get started, you should first keep a log of all the important Forex economic indicators' release dates. Keep a log or make a subscription to one of the economic journals, so you'll know the most important factors of that time. If you are trading in JPY, the Forex economic indicators need to be relevant to the currency type, of course.
Each economic indicator tells you about a different aspect of the economy, and this should be translated in turn into the predicted movement of the currency price. Make sure you understand which aspect the indicator is about. For example, know that the GDP measures the growth of the economy while the PPI . Don't worry, with some experience this will come naturally.
Different indicators have changing importance, according to the country's currency. Some currencies might have inflation indicators as key economic indicators while others will have employment rates as key indicators. This is also something you should find out and read about at various books and online guides.
There are leading economic indicators, which change before a particular Forex trend is set, and lagging indicators, that change after the economy had begun to follow a certain pattern. Both indicators should be used, depending on the currency's situation.
Major Forex Economic Indicators
The Gross Domestic Product (GDP) - The sum of goods and services produced by domestic or foreign companies.
Industrial Production - A measure of the production change, industrial capacity and resources of a country's factories, mines and utilities.
Purchasing Managers Index (PMI) - A monthly index of a country's manufacturing conditions, including new orders, supplier delivery times, inventories, prices, employment, export orders, and import orders.
Producer Price Index (PPI) - A measure of price changes in the manufacturing sector.
Consumer Price Index (CPI) - A measure of the average price level paid by urban consumers for a fixed basket of goods and services.
Employment Cost Index (ECI) - A measure of the number of jobs in more than 500 industries in all states and 255 metropolitan areas.
Tania Raven, Market Analyst
Forex Trading Inflation indicators and Interest Rates
Forex inflation indicators are used very commonly when traders analyze the The inflation effects the interest rates, which in turn can effect the currency markets.
In order to fight inflation, interest rates are raised, and thus the country's currency is strengthened in relation to other currencies. In this way, in the short term, If inflation rises, the currency also rises in value.
On the other hand, if interest rates go higher, then investors withdraw from their investment in the country, and the currency weakens. Thus, in the long run. If inflation rises, the currency will eventually drop in value.
As a counter measure of rising inflation indicators, interest rates rise usually after meeting of BOE (Bank of England), FED (US Federal Reserve), ECB (European Central Bank), BOJ (Bank of Japan) and other central banks.
In order to measure inflation traders use different economic indicators.
Economic Indicators that Influence Inflation Indicators
Gross Domestic Product (GDP) – This measures the total market value of all goods and services that companies make within the country. This is an indicator of the growth pace of a country, and can tell the trader much about the prospect of inflation indicators.
Producer Price Index (PPI) - This measures price changes in manufacturing. It measures the changes in selling prices for the various manufacturers. The prices of manufacturing are at a close link with inflation indicators, and thus can help predict the online Forex trading direction.
Consumer Price Index (CPI) - This measures the average price that consumer pay for a fixed basket of goods and services. When the inflation indicators point to a rising inflation level, goods' prices also rise, and this can be viewed through the CPI.
These measures have been used throughout to evaluate the market and make hard decisions about investments. They should also be used by you when you make .
Jim Barns, Market Analyst
In order to fight inflation, interest rates are raised, and thus the country's currency is strengthened in relation to other currencies. In this way, in the short term, If inflation rises, the currency also rises in value.
On the other hand, if interest rates go higher, then investors withdraw from their investment in the country, and the currency weakens. Thus, in the long run. If inflation rises, the currency will eventually drop in value.
As a counter measure of rising inflation indicators, interest rates rise usually after meeting of BOE (Bank of England), FED (US Federal Reserve), ECB (European Central Bank), BOJ (Bank of Japan) and other central banks.
In order to measure inflation traders use different economic indicators.
Economic Indicators that Influence Inflation Indicators
Gross Domestic Product (GDP) – This measures the total market value of all goods and services that companies make within the country. This is an indicator of the growth pace of a country, and can tell the trader much about the prospect of inflation indicators.
Producer Price Index (PPI) - This measures price changes in manufacturing. It measures the changes in selling prices for the various manufacturers. The prices of manufacturing are at a close link with inflation indicators, and thus can help predict the online Forex trading direction.
Consumer Price Index (CPI) - This measures the average price that consumer pay for a fixed basket of goods and services. When the inflation indicators point to a rising inflation level, goods' prices also rise, and this can be viewed through the CPI.
These measures have been used throughout to evaluate the market and make hard decisions about investments. They should also be used by you when you make .
Jim Barns, Market Analyst
Forex Employment Indicators
In this page we cover the most important employment indicators for the online Forex market, including the ECI, the household survey and the establishment survey. Employment indicators are important, and are used often for of the online Forex trading market.
The Employment Cost Index (ECI)
The ECI is an important Forex employment indicator, and is published in a quarterly report from the U.S. Department of Labor. It measures the growth of employees' compensation, and this includes the wages and benefits that employees get.
The information in the survey is based on a report that is held at the end of the month every quarter. The information that is tracked by the ECI is the wages movements, the fringe benefits and the bonuses that are given to employees at various levels of the organizations.
The report is used to foresee the online Forex trading currencies price movements. As employees increase the pressure for wage raises, this raises inflation levels, as consumer prices move up in their prices. The inflation is assumed to go up if the ECI increases. This in turn lowers the online Forex currency price.
The ECI is a Forex employment indicator that measures the number of jobs in more than 500 industries that cover 50 states and 255 metropolitan areas.
The Employment Report
This report contains two employment reports inside: the household survey and the establishment survey.
The household survey is an employment indicator concerned with households, and is smaller, covering only 50,000 households.
the establishment is about businesses, is more comprehensive and thus it is preferred by analysts of the online Forex market. It covers 400,000 businesses with 47 million people.
The Establishment Survey
Non-farm Payrolls - This is a very important employment indicator for the establishment report, and has crucial importance for online Forex trading. it measures how many people are there on payrolls for non-agricultural businesses.
Average Workweek - This measures the average hours worked non-farm payroll employees, and is a fine judge of the overall strength of the employment report.
Aggregate Hours Worked - This index combines the two previous indexes together.
Average Hourly Earnings - This employment indicator gives us a good idea of the personal income growth during the month, and is especially critical in times of strong economic growth, as an evidence of increasing wage pressures, which can influence the online Forex trading market considerably.
The Household Survey
The Unemployment Rate - This index is calculated through the division of the number of people unemployed by the number of people in the labor force.
There are other employment indicators in the employment report but these are the relevant ones for the
Jim Barns, Market Analyst
The Employment Cost Index (ECI)
The ECI is an important Forex employment indicator, and is published in a quarterly report from the U.S. Department of Labor. It measures the growth of employees' compensation, and this includes the wages and benefits that employees get.
The information in the survey is based on a report that is held at the end of the month every quarter. The information that is tracked by the ECI is the wages movements, the fringe benefits and the bonuses that are given to employees at various levels of the organizations.
The report is used to foresee the online Forex trading currencies price movements. As employees increase the pressure for wage raises, this raises inflation levels, as consumer prices move up in their prices. The inflation is assumed to go up if the ECI increases. This in turn lowers the online Forex currency price.
The ECI is a Forex employment indicator that measures the number of jobs in more than 500 industries that cover 50 states and 255 metropolitan areas.
The Employment Report
This report contains two employment reports inside: the household survey and the establishment survey.
The household survey is an employment indicator concerned with households, and is smaller, covering only 50,000 households.
the establishment is about businesses, is more comprehensive and thus it is preferred by analysts of the online Forex market. It covers 400,000 businesses with 47 million people.
The Establishment Survey
Non-farm Payrolls - This is a very important employment indicator for the establishment report, and has crucial importance for online Forex trading. it measures how many people are there on payrolls for non-agricultural businesses.
Average Workweek - This measures the average hours worked non-farm payroll employees, and is a fine judge of the overall strength of the employment report.
Aggregate Hours Worked - This index combines the two previous indexes together.
Average Hourly Earnings - This employment indicator gives us a good idea of the personal income growth during the month, and is especially critical in times of strong economic growth, as an evidence of increasing wage pressures, which can influence the online Forex trading market considerably.
The Household Survey
The Unemployment Rate - This index is calculated through the division of the number of people unemployed by the number of people in the labor force.
There are other employment indicators in the employment report but these are the relevant ones for the
Jim Barns, Market Analyst
Consumer Spending Forex Trading Indicators
This is published by the Bureau of labor statistics in the U.S. Department of Labor, every 13th of a month. The economic index is relevant for the passing month, and measures the price of a fixed basket of goods and services that is bought by consumers. This is the most used an important tool for the Forex trading market.
It is important to state that this Forex economic indicator does not measure technological commodities which change in price, and this is something the CPI has been criticized for.
When you use the CPI to measure Forex trading price changes, you should always remember to take into consideration the movements in the food and energy prices, because they can change and rise or drop regardless of the Forex currency or the inflation levels.
The CPI is also monitored on it's yearly Forex Trading indicator that tells a great deal on the condition of the Forex inflation levels of a currency.
Consumer Credit Forex Indicator
The consumer credit index is published by the federal reserve every fifth business day of the month. This Forex trading measure is used to evaluate consumer spending. This measure is liable to make considerable changes and fluctuations in its value.
Consumer credit consists of three categories: auto, revolving and other. All in all this indicator is less important than the CPI, but it can also help you gain an understanding of the Tania Raven, Market Analyst
It is important to state that this Forex economic indicator does not measure technological commodities which change in price, and this is something the CPI has been criticized for.
When you use the CPI to measure Forex trading price changes, you should always remember to take into consideration the movements in the food and energy prices, because they can change and rise or drop regardless of the Forex currency or the inflation levels.
The CPI is also monitored on it's yearly Forex Trading indicator that tells a great deal on the condition of the Forex inflation levels of a currency.
Consumer Credit Forex Indicator
The consumer credit index is published by the federal reserve every fifth business day of the month. This Forex trading measure is used to evaluate consumer spending. This measure is liable to make considerable changes and fluctuations in its value.
Consumer credit consists of three categories: auto, revolving and other. All in all this indicator is less important than the CPI, but it can also help you gain an understanding of the Tania Raven, Market Analyst
Introduction to Technical Analysis
Any forex trader must apply a certain method in order to predict the future price of a certain currency, that's a given fact. The entire concept of speculative forex trading is based upon future fluctuations in currency prices. You make profit by buying a certain currency in one price and selling by another.
Therefore, the most important thing for any trader, novice or expert, is to have some sort of prediction to future price changes. Thus came to life several different methods of market analysis, each tries to incorporate different methods and data in order to give some sort of prediction to the future price of various currencies.
The first method we will review in this series of articles is Technical Analysis. Technical analysis is based on the concept that it is possible to predict future prices using only market generated data. All the data and history regarding a price is represented in various charts and imply assorted methodologies. Every trader, no matter what trading style he uses, uses this method at some point. At the very least, these charts help to determine what the ideal buy or sell position is, at any given time. It helps to give a broader look on he trends and patterns in the market.
Many critics accuse the Technicians of ignoring the fundamentals of the market, but they claim in return that all of the market's fundamentals are already represented in the charts. In their opinion any fundamental market rule is already enveloped in the current price and more importantly in the price's history.
Forex trading can be easy using the right reading materials and tools. Follow our latest articles and download our software here at .
Therefore, the most important thing for any trader, novice or expert, is to have some sort of prediction to future price changes. Thus came to life several different methods of market analysis, each tries to incorporate different methods and data in order to give some sort of prediction to the future price of various currencies.
The first method we will review in this series of articles is Technical Analysis. Technical analysis is based on the concept that it is possible to predict future prices using only market generated data. All the data and history regarding a price is represented in various charts and imply assorted methodologies. Every trader, no matter what trading style he uses, uses this method at some point. At the very least, these charts help to determine what the ideal buy or sell position is, at any given time. It helps to give a broader look on he trends and patterns in the market.
Many critics accuse the Technicians of ignoring the fundamentals of the market, but they claim in return that all of the market's fundamentals are already represented in the charts. In their opinion any fundamental market rule is already enveloped in the current price and more importantly in the price's history.
Forex trading can be easy using the right reading materials and tools. Follow our latest articles and download our software here at .
Forex Trading Trends - Uptrends, Downtrends and Sideway Trends
Forex trading trends are used in , in order to view the general direction of the currency. Trends are identified as uptrends, downtrends and sideway trends. Without the use of trends Forex analysts wouldn't have the ability to predict the direction of the currency price at any given time.
Forex Trading Uptrends
An uptrend is a Forex trading trend that occurs when the general direction of the Forex trading currency you are trading is upward.
Forex uptrends are used by traders to make profits while the trend lasts and until it reverses. The goal of most technical traders is to identify a strong uptrend and to profit from it until it reverses, and with this, you are able to cut down on unnecessary losses. The best way to use uptrends is to sell the currency once the new peak become lower than the previous peek.
Forex Trading Downtrends
A Forex downtrend occurs when the general direction of the Forex currency you are trading is downward.
To use downtrend is similar to uptrend use, you simply monitor the currency chart and notice when one peek becomes higher than the previous peek, indicating a reverse in the Forex trading trend direction. Downtrends are also useful tools to determine
Forex Trading Sideway Trends
There isn't much to say about sideway trends, except that they are trend stages in between uptrends and downtrends. Sideway trends usually do not tell much about the currency situation, even though they can hint on a nearing reversal in the trend direction. These are Forex trading trends that are less frequent but still give important information for the online trader.
Now that you've learned all there is to know about Forex trading trends, go on and see how you can use it in the actual Forex trading market.
Forex Trading Uptrends
An uptrend is a Forex trading trend that occurs when the general direction of the Forex trading currency you are trading is upward.
Forex uptrends are used by traders to make profits while the trend lasts and until it reverses. The goal of most technical traders is to identify a strong uptrend and to profit from it until it reverses, and with this, you are able to cut down on unnecessary losses. The best way to use uptrends is to sell the currency once the new peak become lower than the previous peek.
Forex Trading Downtrends
A Forex downtrend occurs when the general direction of the Forex currency you are trading is downward.
To use downtrend is similar to uptrend use, you simply monitor the currency chart and notice when one peek becomes higher than the previous peek, indicating a reverse in the Forex trading trend direction. Downtrends are also useful tools to determine
Forex Trading Sideway Trends
There isn't much to say about sideway trends, except that they are trend stages in between uptrends and downtrends. Sideway trends usually do not tell much about the currency situation, even though they can hint on a nearing reversal in the trend direction. These are Forex trading trends that are less frequent but still give important information for the online trader.
Now that you've learned all there is to know about Forex trading trends, go on and see how you can use it in the actual Forex trading market.
Forex Trading Support and Resistance Levels
In this Forex trading guide we will try to describe in detail exactly what support and resistance means in the following . Support and resistance levels are important indicators that can be used to set stop loss and take profit orders using
Support levels are the places where the price of the currency is expected to rise. This happens when there is enough demand for the currency in order to stop the downtrend and therefore causes it to go up.
In order to recognize support levels in Forex trading, take a look at the Forex chart, and try to find a few lows that fluctuate in a horizontal line. This line will be set as the session's support level.
If a support level is penetrated, and the currency drops below it, then it becomes a resistance level. This is caused when the currency reaches the support level again most traders will sell their currency and cause it to go down again.
Forex trading Resistance levels are also horizontal lines that appear on the upper side of the chart. Resistance levels are used to set the upper level of Forex trading, when supply levels surpass demand for the currency. After a resistance level is broken there is usually a change in the of the currency, and sometimes leaps upwards.
Hopefully, this Forex trading guide will help you make the right decisions in investments, and help you understand this concept of suport and resistance.
Support levels are the places where the price of the currency is expected to rise. This happens when there is enough demand for the currency in order to stop the downtrend and therefore causes it to go up.
In order to recognize support levels in Forex trading, take a look at the Forex chart, and try to find a few lows that fluctuate in a horizontal line. This line will be set as the session's support level.
If a support level is penetrated, and the currency drops below it, then it becomes a resistance level. This is caused when the currency reaches the support level again most traders will sell their currency and cause it to go down again.
Forex trading Resistance levels are also horizontal lines that appear on the upper side of the chart. Resistance levels are used to set the upper level of Forex trading, when supply levels surpass demand for the currency. After a resistance level is broken there is usually a change in the of the currency, and sometimes leaps upwards.
Hopefully, this Forex trading guide will help you make the right decisions in investments, and help you understand this concept of suport and resistance.
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