In The World of Forex Nothing Lasts Forever

In the rapidly changing world of Forex, there are two main ways of trading – one is based on fundamental analysis and another is based on technical analysis. Both beginners and experts should regularly check whether one technique has advantages over another; maybe combining them together would be more appropriate for their purposes and needs.

Chris Bauhamb, market analyst, certainly believes that it makes more sense when the both techniques are combined. It shows both advantages and disadvantages, and the key element of any style that the trader applies. Only the trader himself can measure the level of risk he can afford, and to deal with his emotions. Thus, it is good to combine technical analysis and fundamental approach.

Simon Smith, a longtime trader, relies entirely on fundamental analysis.

Entry and exit points:

Smith believes that you can trade successfully with the basics, but you need to understand and evaluate the technique to know where are your entry and exit points situated. Many traders rely on technical analysis. They do not have any fundamental look at where each currency pair comes from. Each quantitative trading strategy relies on the technicians behind the scene, because the algorithms are based on historical price movements.

Jamie Saetel, technical analyst, believes that the success of trading with implementing technical style depends on how you apply it. “If someone uses the technical approach based on rules, then technical analysis has an advantage – you can calculate risk and change if it is necessary. Fundamental analysis is too slow to alert the trader about the change in the dynamics of the market. ” – he said. According to him, however, one cannot completely ignore all fundamental releases, such as data on GDP or inflation rate.

Further flow:

Another plus of technical analysis is that many key market players use it and it has a strong impact on the market; not keeping track of technical analysis turns out to be a potential drawback because graphics can show independent movements.

Kathleen Brooks, the Research Director, disagrees completely. “Yes, some major players on the stock exchange use algorithms that include technical analysis, but you can not exactly understand what they track or which exact equations they use in their models. The main thing you should remember about technical solutions is that they are based on human reactions – try to measure the balance of opinions on the market. “There are millions of players on the Forex market, all have different time frames and objectives, so technical solutions can be very subjective”.

According to Smith, the key decision falls on technical analysis, because the single system and the potential to use graphics allows to implement a successful strategy strategy and to apply a reliable risk management mechanism. “The place where many traders are confused is emotion. The main errors are whether to continue losing, in hope that it will turn back in your direction, or to take profit earlier for the same reason. To build a strong system just around the basics is very difficult in Forex, ” – he says. “The rules may work for a while, but most of them are not constant, as when the dollar falls, stocks rise. The one reliable rule may be detected, but in the world of Forex, nothing lasts forever. “