There are many different forex strategies available to the average trader. From technical analysis studies of price action to the fundamental values of each economy there are many ways to value each currency pair and how much each currency should ideally be worth.
Technical analysis has quickly become the study of choice for forex traders as it is easy to learn and easily adapted to the forex market. Technical analysis is the study of price levels and a belief that at certain prices investors turn favorable to one currency against another and at other price levels they lose that favor. Technical analysis use everything from trendlines, to candlestick chart reading all the way down to moving averages to determine when to buy and sell. If you've ever seen a chart with squiggly lines and various mathematical charts plotted, chances are you saw someone using technical analysis on a chart. Technical analysis is more applied to both short term charts and long term charts, where it has proved to be a very useful mechanism of making profits. Moving averages are some of the most basic forms of technical analysis. Moving averages are plotted on charts to show the average price of a currency pair for the X number of periods prior to the current time. Many popular settings are the 50, 100 and 200 period moving averages to show both the short term and long term average price for a currency. Investors also use moving average crosses usually a 10 period moving average with a 50 period moving average to show buy or sell signals. When the shorter term period moving average falls below the longer term average a sell signal is shown. When the short term moving average rises above the longer term average then a buy signal is recorded.
Fundamental analysis is the study of the health of economies and use of economic barometers such as GDP growth and trade balances to decide which currency will be gaining value against another. Fundamental analysis is considered to be more accurate in the long term compared to the short term because it could be argued that daily fluctuations due to speculation often even out to find a certain medium of sorts.
Depending on the investor and appropriate levels of risk each form of analysis can prove to be profitable. An education is paramount importance, which is where currency trading websites come in useful - the Forex Lasers forum is a prime example. So whatever path one wishes to pursue, going in blind is just asking for failure. Technical analysis or fundamental analysis, both require dedication. Many long term investors such as the famed George Soros use fundamental analysis to decide profitable trends while many short term traders and day traders utilize technical analysis to capitalize on quick changes in price. The point is, whichever form of analysis or strategy you decide is inevitably a matter of one’s education, personal risk appetite and comfort.
Of course, you can always look for the best forex brokers out there and work with an experienced one that will help you navigate all the ambiguity.
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