Basically, forex traders always use two different approaches to make decisions in forex trading. The first approach is Technical Analysis, and the other one is Fundamental Analysis. But we added 1 more approach which was not included among two approaches above. We call it Logical Analysis.
What does Fundamental, Technical, and Logical Analysis mean ?
Technical Analysis is the art of forecasting price movements through the study of chart patterns, indicator signals, sentiment readings, volume, open interest, and other mathematical analysis to identify trading opportunities.
Fundamental Analysis focuses on key underlying economic and political factors to determine the direction of a currency's value. Fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumors. There are a number of fundamental indicators traders may follow that reflect how an economy is changing and gleam insight into Forex market prices to come.
Logical Analysis is an approach to exploit the law of eternal balance in the universe (its like the eternal balance of yin and yang). Forex and every matter in this world are affected by the universe. Hence this approach can be implemented in forex as well. Later we will give you a very profitable trading system to gain an enormous profit based on this method.
Fundamental, Technical, and Logical Analysis. Which one is the best ?
Technical traders usually say that it is impossible to trade on the news, because the market moves so fast. In the other hand, fundamentalists say that only the news move the market and indicator is always a follower.
The big question is what actually moves the forex market? It is trader's expectation and speculation that moves the market! Neither the news nor the graphs move the market. The most dramatic price movements, however, occur when unexpected events happen.
There is another important question you should think of: How much money is traded by fundamentalists, and how much money is traded by technical traders?
We will tell you a little secret in forex industry. Do you know that almost all of big banks, hedge funds, and other big financial institutions trade using Fundamental Analysis? And unfotunately those big financial institutions have the biggest amount of money in the world.
So what is the correlation with forex market? It is very rational and predictable : At the time they open trades (using a large amount of money), the market moves accordingly. What do fundamentals do ? If the news report for a country is better than expected, that country's currency usually gets stronger and moves the price, if it's worse, that currency will be weaker and moves the price to the other way.
Do you know why there is only a small amount of fundamental forex trading e-book taught by forex brokers out there ? This probably has something to do with more profitable nature of fundamental analysis. As you know, some brokers dont like if their customers win. If you win they will lose (they trade against you)
What about technical traders ? It seems that most of technical traders and small traders don't have such a lot of money compared to big financial institutions, even altogether.
For complexity, there are lots of different indicators and timeframes used in technical analysis. At the same moment, each of them are giving different signals.
The conclusion is we prefer to use fundamental analysis compared to technical. Then what about logical analysis ? To be honest, logical analysis the best method to trade forex, as it will give you a constant, reliable, and greatest result almost all the time.
Forex Trading Tips
Trading tips suitable for Technical Traders :
Only use the most common, widely used Trading Indicators and Never trade during important News Accouncement Time.
Trading tips suitable for Fundamental Traders :
Be patient, discipline, use an accurate clock and only trade during important news release.