Which is better for forex market,technical analysis or fundamental analysis?and why?
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Filed under: Forex Information
Academic studies show that assuming that FX prices follow a random walk is better at predicting future FX prices than either method.
The one piece of information that has been shown to be a good predictor of future FX movements is order flow. Unfortunately, Banks have this information — and private investors do not. This puts individuals at a distinct disadvantage.
To be successful as a day trader you need a solid grounding in both technical and fundamental analysis. Technical so as to identify price movements, support and resistance levels, pivot points, oscillators, moving averages and indicators. And then fundamental analysis will help you to understand the external market forces such as news releases, geo-political events, central bank interest decision, impact of commodity prices on currencies etc.
The other approach to Forex trading is the practice that I prefer whereby we enter a conservative, long term hedged position and can make a very nice return whether the market moves up or down. We don’t use the charts and technical analysis tools or the fundamental analysis disciplines although I do find myself drawn back to an occassional short term trade or two when I need a fix.
Paul