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You are now going to have to decide
the best way to trade the market. The two most common
approaches are that of fundamental analysis and
technical analysis.
Fundamental analysis concentrates
on the forces of supply and demand for a given security.
This approach examines all the factors that determine
the price of a security and the real value of that
security. This is referred to as the intrinsic value.
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If the intrinsic value is below the market price
then there is an opportunity to buy and if the market
is above the intrinsic price then there is an opportunity
to sell.
Technical analysis is the study of
market action, mainly through the use of charts
and indicators to forecast the future price of a
security.
There are three main points that a
technical analyst applies:
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Market action discounts everything.
Regardless of what the fundamentals are saying,
the price you see is the price you get.
-
The price of a given security
moves in trends.
-
The historical trend of a security
will tend to repeat.
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Of all of the above things the most
important of them is point A. The tools of the technical
analyst are indicators, patterns and systems. These
tools are applied to charts. Moving averages, support
and resistance lines, envelopes, Bollinger bands
and momentum are all examples of indicators.
There are many ways to skin a cat,
as the saying goes but fundamental and technical
analysis are the two most popular ways of trading
FX.
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I hope you have enjoyed this introduction to the
forex market and should you go on to become a trader
then I wish you great success.
Good Trading
Mark McRae
www.surefire-forex-trading.com
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