Forex trading today may appear much too complex for the average person to grasp. The video images of the market fill our vision — banks of blinking computer screens, screaming traders, huge blocks of currency exchanging hands at the speed of light — and reinforce this perception.
Forex profiting seems to be something that only shadowy figures like the famous George Soros can do under these circumstances. But these images are actually part of a façade, disguising a relatively simple transaction. Very little in the forex markets is so complex that you could not understand it.
In its essence, each foreign exchange is a trade. You exchange one monetary unit (currency) for another. That’s it. Dealers and investors may utilize intricate forex trading strategies or confuse you with technical jargon, or impress you with overly complex statistical models. But these things do not alter the act of exchange.
Understanding this fundamental fact helps you cut through the clutter and mystery that envelops the foreign exchange market. Forex trading today is not really far removed from the way people have traded currencies for thousands of years. The techniques and tools may have changed, but the simple exchange remains the same, and forex profiting continues to be the object of the game.
Nevertheless, if you wish to enjoy the benefits of forex profiting, you will have to learn the techniques and tools for analyzing the markets, and there are two basic ways, fundamental analysis and technical analysis.
Fundamental analysis evaluates the economic, social, and political forces that drive the currents of supply and demand. Fundamental analysts examine various indicators, like growth rates, interest rates, inflation and unemployment, and use these to estimate future performance. The assumption of fundamental analysis is that supply and demand are the determinants of currency price movements. The conclusions from this analysis become the basis for forex profiting trades. While this may be true on a fundamental level, market psychology can play a strong influence and that is not always found in macroeconomic indicators.
Technical analysis concentrates on studying price movements, using historical data to project the direction of future prices. The premise in technical analysis is that all current market information is already factored into the prevailing price of each currency. Thus there is no need to analyze macroeconomic data anymore; studying price action is all that you need to plot your forex trading moves and make forex profiting transactions.
Since technical analysis became popular about twenty years ago, there has been a running debate as to which method is more successful. Short-term traders like to use technical analysis since their trading strategies are focused primarily on the gyrations in price that can yield substantial forex profiting trades on the margins. Medium-terms traders have longer timelines on their investments and tend to use fundamental analysis to estimate the currency’s proper value and future value; they will trade forex profiting from the difference.
It may be that the best strategy for forex profiting is one that utilises both fundamental and technical analysis. You can be in a forex profiting position when price movements are gyrating for some unexplained reason. There are forex profiting opportunities in such situations, if you place your trades properly. Without doing any real research and just looking at the currency charts, you can sense when you are on the forex profiting side of a move.
You should respect the soundness of fundamental analysis. True movements in currency prices are based on the level of need for the currency. There is no denying those charts and those stories of famous speculators making huge amounts in forex profiting trades in three days. Making a lot of money from forex profiting moves is indeed possible, but the risks are real. Even the great money managers look for 15- to 20-percent returns over the long term. Beyond the façade, forex trading and forex profiting returns still perform like a business. And that’s how you should approach it, like a business.