Type of Analysis in Forex
Technical analysis is a study of historical price movements which helps you, as a trader, to recognize trends and technical signals in order to make a decision as to the direction in which the price may move.
The main argument for the use of technical analysis is that theoretically all current market data is reflected in the price. If price reflects all the data that is out there, then price action is all one will really need to make a good trade.
Well, basically, that’s what the technical analysis is all about! If the price level has been held as a key support or resistance in the past, traders will keep an eye on it and base their trade on that historic price level.
Fundamental analysis, also known as news trading, this technique used by traders who rely mainly on economic market news releases to determine their directional bias and trade predictions. This type of analysis takes into account events such as interest rates and economic reporting.
Led up to the extensive availability of trading platforms, fundamental analysis was widely considered to be the most typical way of investing. The methodology behind this type of analysis is based on the theory that whatever happens in the short term, eventually the price of your currency trading must follow the economic figures released.
From the start, economic data and fundamental events tend to be significant in terms of the directional bias of a certain currency pair as they guide price movements. However, a number of times the market has reacted unexpectedly to certain news events.